ZAR Asset Backed Note Programme

Transcription

1 TRANSACTION SUPPLEMENT Blue Granite Investments No. 2 (Proprietary) Limited (Incorporated with limited liability under registration number 2006/007779/07 in the Republic of South Africa) ZAR Asset Backed Note Programme R553,000,000 Class A1 Notes due 21 June 2031 Rated AAA (zaf) by Fitch Southern Africa (Proprietary) Limited Issue Price 100% R1,348,000,000 Class A2 Notes due 21 June 2031 Rated AAA (zaf) by Fitch Southern Africa (Proprietary) Limited Issue Price 100% R662,000,000 Class A3 Notes due 21 June 2031 Rated AAA(zaf) by Fitch Southern Africa (Proprietary) Limited Issue Price 100% R160,000,000 Class B Notes due 21 June 2031 Rated AA (zaf) by Fitch Southern Africa (Proprietary) Limited Issue Price 100% R101,500,000 Class C Notes due 21 June 2031 Rated A (zaf) by Fitch Southern Africa (Proprietary) Limited Issue Price 100% R67,500,000 Class D Notes due 21 June 2031 Rated BBB (zaf) by Fitch Southern Africa (Proprietary) Limited Issue Price 100% R63,000,000 Class E Notes due 21 June 2031 Rated BB (zaf) by Fitch Southern Africa (Proprietary) Limited Issue Price 100% R10,500,000 Class F Notes due 21 June 2031 Rated B (zaf) by Fitch Southern Africa (Proprietary) Limited Issue Price 100% Arranger and Dealer Attorneys to Arranger and Issuer

2 This document constitutes the Transaction Supplement relating to the Issuer described in this Transaction Supplement. By executing this Transaction Supplement, the Issuer binds itself to the terms and conditions of the Master Programme and, accordingly, this Transaction Supplement must be read in conjunction with the Programme Memorandum issued by Blue Granite Investments No. 1 (Proprietary) Limited dated 28 October To the extent that there is any conflict or inconsistency between the contents of this Transaction Supplement and the Programme Memorandum, the provisions of this Transaction Supplement shall prevail. In addition to disclosing information about the Issuer and the Issuer Programme, this Transaction Supplement may specify other terms and conditions of Notes (which replace, modify or supplement the Terms and Conditions), in which event such other terms and conditions shall, to the extent so specified in this Transaction Supplement, or to the extent inconsistent with the Terms and Conditions, replace, modify or supplement the Terms and Conditions. Any capitalised terms not defined in this Transaction Supplement shall have the meanings ascribed to them in the section of the Programme Memorandum headed Glossary of Definitions. References in this Transaction Supplement to the Terms and Conditions are to the section of the Programme Memorandum headed Terms and Conditions of the Notes. A reference to any Condition in this Transaction Supplement is to that Condition of the Terms and Conditions. Arranger and Dealer The Standard Bank of South Africa Limited The date of this Transaction Supplement is 19 June

3 TABLE OF CONTENTS GENERAL DESCRIPTION OF THE ISSUER PROGRAMME 3 TRANSACTION PARTIES 5 TRANSACTION DOCUMENTS 6 THE ISSUER 7 THE SECURITY SPV 8 THE ORIGINATOR AND THE ORIGINATOR S CREDIT OPERATIONS 9 THE HOME LOAN POOL 15 THE SERVICER, THE SERVICING AGREEMENT AND SERVICER UNDERTAKING AGREEMENT 18 THE ADMINISTRATOR AND THE ADMINISTRATION AGREEMENT 20 STRUCTURAL FEATURES 21 PRIORITY OF PAYMENTS 26 THE SALE AGREEMENT 29 TRANSACTION SPECIFIC DEFINITIONS 32 ADDITIONAL/AMENDED TERMS AND CONDITIONS 42 GENERAL INFORMATION 43 CORPORATE INFORMATION 45 Appendix 1: ASSET POOL STRATIFICATION 46 Appendix 2: AUDITORS REPORT 50 Appendix 3: ESTIMATED AVERAGE LIVES OF THE NOTES 51 Page 2

4 GENERAL DESCRIPTION OF THE ISSUER PROGRAMME A general description of the Issuer Programme is set out below. The general description does not purport to be complete and is taken from, and is qualified by, the remainder of this Transaction Supplement and, in relation to any particular Tranche of Notes, the Applicable Pricing Supplement. A brief overview of the Issuer Programme is as follows: Borrower Indemnity and first ranking mortgage over the Borrower s Property SBSA Security Cession and Indemnity Security SPV Sale of Participating Assets Limited Recourse Guarantee Borrower Participating Assets (Payments) Blue Granite Investments No. 2 (Proprietary) Limited Notes Issue Proceeds Investors Excess Spread and Servicing Fee Subordinated Loans SBSA Subordinated Lenders Issuer Programme Steps: 1. SBSA carries on the business of, amongst other things, originating Home Loans against the security of Mortgage Bonds and/or Indemnity Bonds registered in favour of SBSA by the relevant Borrower. 2. SBSA, as Seller, will sell Participating Assets to a newly created, insolvency remote Issuer on the Initial Effective Date. During the Revolving Period, the Issuer may acquire Additional Assets from the Seller on the terms set out in the Sale Agreement. 3. The Issuer will fund the purchase of Participating Assets on the Initial Issue Date through the issuance of the Notes. 4. SBSA, as Servicer to the Issuer, will perform the administration, servicing and management of the Participating Assets sold and transferred to the Issuer on behalf of the Issuer. In relation to Guaranteed Home Loans, the Servicer will furthermore provide the Servicer Indemnity Undertaking. 5. In terms of the Servicer Indemnity Undertaking, the Servicer undertakes on receipt of a claim by the Issuer: 5.1 if so requested, to pay over all amounts collected from the Borrower in terms of the Borrower Indemnity and/or the Indemnity Bond; or 5.2 if so requested by the Issuer or the Security SPV, to procure the transfer of the: relevant Indemnity Bond to the Issuer; or 3

5 5.2.2 relevant Borrower Indemnity and Indemnity Bond to the BG Guarantee Entity, and to assign to the BG Guarantee Entity the Servicer s rights and obligations under the Servicer Undertaking Agreement in relation to the claim, in full discharge of its obligations in respect of such claim. 6. On the occurrence of a Mortgage Perfection Trigger, the Servicer shall, in terms of the Servicer Undertaking Agreement: 6.1 procure the transfer of all the Indemnity Bonds to the Issuer, if so requested; or 6.2 if so requested by the Issuer or the Security SPV and provided that Fitch have confirmed prior to such transfer that such transfer will not cause it to downgrade the rating of the Notes in issue, procure the transfer of all the Indemnity Bonds and the Borrower Indemnities to the BG Guarantee Entity (and the Servicer shall transfer all its rights and obligations under the Servicer Undertaking Agreement to the BG Guarantee Entity). 7. Alternatively, if so requested at any time by the Issuer or the Security SPV, the Servicer shall, in terms of the Servicer Undertaking Agreement, procure the transfer: 7.1 of any or all Indemnity Bonds to the Issuer; or 7.2 of any or all the Indemnity Bonds and corresponding Borrower Indemnities to the BG Guarantee Entity (and the Servicer shall transfer all its rights and obligations under the Servicer Undertaking Agreement to the BG Guarantee Entity). 8. SBSA, as Administrator to the Issuer, will provide financial administration services to the Issuer, including administering the Priority of Payments. 9. SBSA, as the Derivative Counterparty, will enter into Derivative Contracts with the Issuer to hedge all of the Issuer s interest rate risk exposure arising from any mismatch between the basis of the interest earned on the Performing Assets and that payable on the Notes. 10. SBSA and any member of SBG, as Subordinated Lenders, will advance Subordinated Loans to the Issuer to provide part of the initial funding for the Issuer on the Initial Issue Date. 11. On the Initial Issue Date and thereafter the Issuer will pay an amount into the Cash Reserve, such that the Cash Reserve shall be funded at 2.75% of the greater of the aggregate of the Principal Balances of the Participating Assets of the Issuer or the Outstanding Principal Amount of the Notes in issue from time to time. 12. On the Initial Issue Date and thereafter the Issuer will pay an amount into the Redraw Reserve, such that the Redraw Reserve shall be funded at 2.25% of the greater of the aggregate of the Principal Balances of the Participating Assets of the Issuer or the Outstanding Principal Amount of the Notes in issue from time to time. 13. Additional credit enhancement is provided for the Notes by the Issuer trapping cash in the Arrears Reserve in terms of the Priority of Payments, if certain delinquency levels are triggered. 14. SBSA, as Preference Shareholder, will be entitled to receive dividends in respect of the Preference Shares. 15. The Security SPV has been incorporated for the purpose of holding and realising security for the benefit of Secured Creditors, including Noteholders, subject to the Priority of Payments. 16. The Security SPV will furnish a limited recourse Guarantee to the Noteholders and other Secured Creditors. The Issuer will indemnify the Security SPV in respect of claims made under the Guarantee. As security for such Indemnity, the Issuer will cede and pledge the assets of the Issuer to the Security SPV. 4

6 TRANSACTION PARTIES Programme Wide Owner Trustee Security SPV Owner Trustee Arranger Administrator Servicer Maitland Trust Limited Maitland Trust Limited SBSA SBSA, acting through its Group Finance Division SBSA, acting through its Home Loans Division Transaction Wide Originator SBSA Seller SBSA, acting through its Home Loans Division Issuer Blue Granite Investments No. 2 (Proprietary) Limited, registration number 2006/007779/07 Security SPV Blue Granite No. 2 Security SPV (Proprietary) Limited, registration number 2006/007773/07 Dealer SBSA Subordinated Lenders SBSA and any member of SBG Preference Shareholder SBSA Calculation Agent SBSA Transfer Agent Computershare Investor Services 2004 (Proprietary) Limited Settlement Agent SBSA Account Bank SBSA GIC Provider SBSA Derivative Counterparty SBSA Rating Agency Fitch Such parties may be replaced in accordance with the provisions of the Transaction Documents. 5

7 TRANSACTION DOCUMENTS Programme Wide 1. Programme Memorandum dated 28 October 2005, incorporating the Terms and Conditions of the Notes 2. Trust deed of the Owner Trust 3. Trust deed of the Security SPV Owner Trust Transaction Wide 4. Memorandum and articles of association of the Issuer 5. Memorandum and articles of association of the Security SPV 6. This Transaction Supplement dated 14 June Common Terms Agreement dated 14 June Sale Agreement dated 14 June Servicing Agreement dated 14 June Servicer Undertaking Agreement dated 14 June Administration Agreement (including appointment of Administrator as Calculation Agent) dated 14 June Owner Trust Suretyship dated 14 June Pledge dated 14 June Security Cession dated 14 June Guarantee dated 14 June Indemnity dated 14 June Bank Agreement dated 14 June Preference Share Subscription Agreement dated 14 June Transfer Agent Agreement dated 14 June Subordinated Loan Agreement (First Loss) dated 14 June Subordinated Loan Agreement (Second Loss) dated 14 June Safe Custody Agreement dated 9 June Derivative Contract dated 14 June Guaranteed Investment Contract dated 14 June Programme Agreement dated 14 June Note Subscription Agreements from time to time 27. Applicable Pricing Supplement from time to time 6

8 THE ISSUER 1. INTRODUCTION The Issuer was incorporated and registered in South Africa on 15 March 2006, under Registration No. 2006/007779/07 under the Companies Act as a private company with limited liability. The issued ordinary share capital of the Issuer comprises one hundred ordinary shares with a par value of ZAR1.00, held by the Owner Trust and the issued preference share capital of the Issuer comprises of one Preference Share with a par value of ZAR0.01 held by the Preference Shareholder. The Issuer has no subsidiaries. 2. DIRECTORS The Directors of the Issuer are August Bernard van Heerden, Paul Werner Behrens and Edwin Marcus Letty, only one of whom is nominated by SBSA. The board of directors of the Issuer is accordingly independent of SBSA as contemplated in paragraph 4(2)(m) of the Securitisation Regulations. 3. REGISTERED OFFICE The registered office of the Issuer is situated at Standard Bank Centre, 9th Floor, Reception 3, 5 Simmonds Street, Johannesburg, AUDITOR The current auditors of the Issuer are KPMG and PricewaterhouseCoopers. 5. ACTIVITIES The activities of the Issuer will be restricted by the Transaction Documents and will be limited to the issue of Notes, the purchase of Participating Assets meeting the Eligibility Criteria, the exercise of related rights and powers and other activities referred to in the Transaction Documents or reasonably incidental to such activities. As at the date of this Transaction Supplement, save as disclosed herein, the Issuer has no loan capital outstanding or created but unissued, no term loans outstanding and no other borrowings or indebtedness in the nature of borrowing nor any contingent liabilities or guarantees. 7

9 THE SECURITY SPV 1. INTRODUCTION The Security SPV was incorporated and registered in South Africa on 15 March 2006, under Registration No. 2006/007773/07 under the Companies Act as a private company with limited liability. The issued share capital of the Security SPV comprises one ordinary share with a par value of ZAR1.00, held by the Security SPV Owner Trust. The Security SPV has no subsidiaries. 2. DIRECTORS The Directors of the Security SPV are Paul Werner Behrens and Edwin Marcus Letty. 3. REGISTERED OFFICE The registered office of the Security SPV is situated at c/o Maitland Trust Limited, 1st Floor, 32 Fricker Road, Illovo Boulevard, Johannesburg, AUDITOR The current auditors of the Security SPV are KPMG and PricewaterhouseCoopers. 5. ACTIVITIES The activities of the Security SPV are described in the section of the Programme Memorandum headed Security and restricted in terms of its memorandum and articles of association. 8

10 THE ORIGINATOR AND THE ORIGINATOR S CREDIT OPERATIONS This section should be read in conjunction with, and is qualified in its entirety by, the detailed information contained elsewhere in this Transaction Supplement and the Programme Memorandum and in particular, the section headed The Originator and the Originator s Credit Operations. GROUP FINANCIAL HIGHLIGHTS The financial highlights are set out below. Change % Standard Bank Group Earnings Headline earnings 1 Rm Profit attributable to ordinary shareholders 1 Rm Other indicators Headline EPS 1 cents ,0 558,1 Fully diluted headline EPS 1 cents ,5 550,9 EPS 1 cents ,6 569,0 Fully diluted EPS 1 cents ,2 561,6 Dividend cover based on normalised HEPS times 2,5 2,5 Total dividends per share cents ,0 231,5 Net asset value per share 1 cents Ordinary shareholders funds 1 Rm Price-to-book 1 times 2,7 2,7 ROE 1 % 25,2 24,2 Capital adequacy % 14,2 15,0 Number of ordinary shares weighted average 1 thousands fully diluted weighted average 1 thousands Standard Bank operations Earnings Headline earnings 1 Rm Profit attributable to ordinary shareholders 1 Rm Balance sheet Total assets Rm Loans and advances Rm Deposit and current accounts Rm Other indicators ROE 1 % 25,8 25,1 Price-to-book 1 times 2,6 2,7 Net interest margin % 2,93 3,07 Non-interest revenue to total income % 56,3 56,7 Credit impairment charges (income statement) Rm Credit loss ratio % 0,41 0,43 Cost-to-income ratio % 56,6 58,0 Effective tax rate (including indirect taxation) % 27,4 28,3 Number of employees Results normalised to reflect legal and economic substance of Black Ownership Initiative and deemed treasury shares held for benefit of Liberty Life policyholders. 9

11 GROUP BUSINESS UNITS The Standard Bank Group key business units report as follows: Standard Bank Group Personal and Business Banking Corporate and Investment Banking Investment Management and Life Insurance Instalment sale and finance leases Global markets Liberty Life Mortgage lending Banking and trade finance Stanlib Card products Investment banking Transactional products Bancassurance The business units are briefly described below. Personal and Business Banking This includes banking and other financial services to individual customers and small- to medium-sized enterprises throughout South Africa and in the rest of Africa Net advances (Rm) Headline earnings (Rm) ROE (%) 30,9 34,2 Cost-to-income ratio (%) 60,0 62,8 Credit loss ratio (%) 0,71 0,58 Headline earnings contribution (%)

12 The major product areas within Personal and Business banking are represented as follows: Total income Normalised headline earnings Change Change % Rm Rm % Rm Rm Instalment sale and finance leases Mortgage lending Card products Transactional products Bancassurance Personal and Business Banking Corporate and Investment Banking This includes commercial and investment banking services to larger corporates, financial institutions and international counterparties, focused on emerging markets through South Africa, 16 other African countries and 21 countries outside Africa Net advances (Rm) Headline earnings (Rm) ROE (%) 27,0 27,2 Cost-to-income ratio (%) 54,0 51,5 Credit loss ratio (%) (0,07) 0,18 Headline earnings contribution (%) The major product areas within Corporate and Investment Banking are represented as follows: Total income Normalised headline earnings Change Change % Rm Rm % Rm Rm Global markets (8) Banking and trade finance Investment banking (3) Corporate and Investment Banking Investment Management and Life Insurance This includes life insurance and asset management activities by group companies Liberty Life and Stanlib Total assets (Rm) Third party funds under management (Rm) Normalised embedded value (Rm) Normalised headline earnings (Rm) Headline earnings contribution (%) 7 5 STANDARD BANK HOME LOANS DIVISION SBSA utilised the opportunity created by changed legislation, allowing Banks to offer residential mortgages, and started Home Loans Division (SBHL) in December A significant component of the basis for business process and staff was created out of the existing structure of Standard Building Society. From humble beginnings of 7 take-on staff, SBHL is now a versatile, competitive business unit with a residential mortgage market share currently close to 28%. SBHL forms part of the Personal & Business Banking Division of SBSA as highlighted above. The SBHL organogram reflects the business unit s structure, below: 11

13 Leon Barnard Director SBHL Loans staff James Cullen Director SBHL Operations John Rivers-Moore Director SBHL Sales and Distribution Owen Sorour Director SBHL Credit (i) Francois Schindehutte Director SBHL Finance (ii) Linda Sing Director SBHL Product LIM Shaheen Adam Director SBHL Product Gerhard Cruywagen Head SBHL Compliance and Risk Notes: (i) Owen Sorour has a direct reporting line to the Director Personal & Business Banking Credit. (ii) Francois Schindehutte has a direct reporting line to the Director Personal & Business Banking Finance. Origination and Customer Interaction: Products, Acquisition and Operations: Products Home Loans Product and Low Income Housing units deliver development and management services. Product diversity is required to cover a wide range of customer profiles and income ranges based on the country s social demographics, in the following key categories/segments: Affinity and Mass; Private; Affordable Housing; and Fully Guaranteed (pension-backed) Lending. Acquisition SBSA follows a multi-channel strategy that involves partnerships on internal and external fronts, as follows: Internal: Branch network; Private Bank and Priority Suites; Internet; Call centre; Home Loans mobile consultants; and Business banking. External: Corporate partnerships; Mortgage originators; Estate agencies; and Developers. Operations Application processing and customer management involves five provincial home loans offices. The new loans team is responsible for application, processing and granting; the assessors are responsible for property valuation and the registration team is responsible for the legal fulfilment process. 12

14 Once application information has been validated it is input into credit application scorecards. The scorecard decision outcome is an approval, decline or referral to the credit granting team to make the final grant decision. A credit quality assurance team validates key data inputs on a sample (±20%) of monthly grants. Results of the monthly assurance assessments are distributed to key credit and operations staff for further action. Provincial operations are supported by the retention unit; securities and cancellations; client services departments and the customer contact centre. Further business management and support involves SBHL finance, SBHL credit, compliance and risk, legal and various other centralized service teams. Home Loans Credit Governance and Structure Credit risk is managed in a governance structure supported by clearly defined mandates and delegated authorities. The Group Credit Committee delegates authority to the African Credit Committee for the approval of credit proposals. The Personal and Business Banking Credit department is responsible for the credit operations within the Personal and Business Banking Division of the group and is managed and mandated by the Personal and Business Banking Credit Committee. Credit decision making is independent of other business areas. Home Loans credit consists of two primary areas which cover underwriting and collections. Underwriting The underwriting team consists of four provincial processing units in Johannesburg, Pretoria, Cape Town and Durban. These processing units cover all non-scored business origination processes and effectively assess loan applications. Credit scoring and policy rules are applied against each application and each applicant in the case of multiple (joint) applicants. Governance committees and processes ensure the effective evaluation of, and changes to credit policies. Application scorecards were first introduced in mid-1997 to support the entire underwriting process. The scorecard development team has used expertise from Experian/Scorex although most development is now done in-house with guidance from international scorecard consultants. The Experian Strategy Manager software application is used in support of bespoke Personal & Business Banking Credit software and systems, managing both customer-application and behavioural scorecards. Internal and external data is used in the scoring process. Ongoing and regular reviews of scorecards are conducted using analytical methods. Cut-offs are adjusted depending on SBSA s risk appetite and the economic outlook. A dual credit bureau strategy is utilised. The outcome of the process is a credit score associated with a predetermined risk profile including the probability of default. Credit scores are categorised by risk-bands which are then used to determine interest-rate pricing and terms and conditions extended to the applicant. Acceptance or rejection of the application offered to the customer is largely driven by scorecard outcomes. Each application is initially scored in the online environment. Credit policies and procedures supplement the scorecard and enhance the business ability to best manage exceptions or outliers, commonly known as refers. The granting area that assess the refers is staffed by qualified and experienced personnel of appropriate seniority with appropriate mandates. This ensures that all referred applications found to contravene policy rules or supported by compelling circumstances i.e. marginal affordability, are comprehensively reviewed. Acceptance rates and the relative performance of referred applications are monitored, maintaining established parameters. Collections The Home Loan Collections Department is centralised in Johannesburg. The primary objective of the arrears management process is to rehabilitate arrear accounts. An account is deemed to be in arrears if any payment or portions thereof have not been made in a timely manner. Accounts are differentiated into two broad categories in the collections process depending on their arrears status. These are: Pre-Legal or Pre-Non-Performing Loans (NPL), including collectors; and Legal or Non-Performing Loans (NPL), including deceased estates and insolvencies. Accounts in pre-legal/pre-npl are those which are 1 instalment or more in arrears and have not yet been placed in the foreclosure process. Deceased estates and insolvencies will move directly to Legal/NPL as soon as they have been identified as such. 13

15 It should be noted that accounts could be in the pre-legal process after 90-days in arrears as a result of transfer being awaited for the sale of the related property. In most of these instances a property guarantee will be held. Legal or NPL accounts are those on which the foreclosure process has been initiated. Once accounts have been flagged as legal/npl, interest income is suspended and specific debt provisions are raised against these accounts according to the agreed policy. Most legal/npl accounts are outsourced to SBSA s panel of attorneys as part of the debt collection process. Differentiated collection strategies are used to ensure an effective and efficient process. The risk determines the collection procedure to be followed with respect to each account including the type of contact (phone call, physical calls, letters, SMS, etc.) as well as frequency of contact. Resources available to implement the collections procedure include the credit call centre, located in Johannesburg. Systems All aspects of SBHL business are operated through systems that are continually reviewed and updated to support business requirements. These systems are integrated into SBSA s branch network and third party originators. This facilitates the comprehensive management of origination, customer management, legal, credit and retention processes. SBHL was the first area in credit to implement an automated collections system (CACS). The CACS was implemented in November 2005 and is performing to expectations. 14

16 THE HOME LOAN POOL This section should be read in conjunction with, and is qualified in its entirety by, the detailed information contained elsewhere in this Transaction Supplement and the Programme Memorandum and in particular the loan pool information disclosed under Appendix I of this Transaction Supplement. 1. HOME LOAN POOL 1.1 The Home Loans included in this transaction were originated by SBSA directly through its network of branches or indirectly through third party mortgage originators (selected by the date on which the Mortgage Bond or Indemnity Bond, as the case may be, was registered). The loan pool is a subset that was randomly selected from of all loans that were originated from 1 July 2005 and complied with the Eligibility Criteria. All loans that were included in the loan pool have been evaluated and approved in terms of SBSA s standard credit procedures applicable to residential mortgage loans at the time they were granted. The majority of property valuations are performed by valuers employed by SBSA or, in some cases, by accredited independent valuers. 1.2 All Home Loans are amortising and the Borrower is required to repay the loan in equal instalments over the term of the loan. The loans generally bear a variable interest rate, and when that rate changes, the instalment will be recalculated to ensure that the loan is amortised over the remaining term of that loan. Where the loans are linked to a variable rate, this will be SBSA s Prime Rate as determined from time to time. Historically all the major banks have charged similar prime rates. However, SBSA is not obliged to change its rate when other banks do or to charge a similar rate. 1.3 Some Home Loans are subject to a fixed rate of interest (or the rate may be capped) for part of the term of such loans. The remainder of the Home Loans are typically granted at a variable rate that is a concession to SBSA s Prime Rate (i.e. on a Prime minus basis). The magnitude of the concession (discount) is determined by SBSA when the loan is granted and reflects, to some extent, the creditworthiness of the Borrower. In terms of the Eligibility Criteria the minimum interest rate payable on each loan is the Prime Rate less 2.2% (or, in the case of a fixed rate loan, the net yield paid by the Hedge Counterparty). 1.4 All of the Home Loans included in this Initial Asset Pool are Mortgaged Home Loans and Guaranteed Home Loans and, in the case of Mortgaged Home Loans, will require a registration of the cession of the Mortgage Bonds in the relevant Deeds Office in order to give the Issuer access to the Mortgage Bonds. 2. HISTORICAL DATA 2.1 The tables in Appendix 1 set out statistical information representative of the characteristics of the portfolio of Home Loans on the Cut-Off Date, being 12 June The aggregate balance of the portfolio of Home Loans on the Cut-Off Date is R2,841,083, The information is derived from information supplied by the Seller, which reflects the position as at the Cut-Off Date. The characteristics of the Initial Asset Pool as at the Initial Effective Date may differ from those set out in the tables as a result of, inter alia, Repayments and Prepayments of Home Loans prior to the Initial Effective Date. 2.2 At the Cut-Off Date, the pool of Home Loans comprised 77% of Borrowers that were not self-employed, the remainder being self-employed. Information in respect of employment and use of the property is derived from information supplied to the Seller by the Borrowers which cannot be independently verified. No fixed rate loans have been included in the initial pool of Home Loans. 3. ELIGIBILITY CRITERIA On origination of each Participating Asset from time to time, the Seller s standard credit approval policies and procedures will have been applied. The general criteria that each Participating Asset must satisfy in order to qualify for acquisition by the Issuer, include, inter alia, the following, all as at the Effective Date: 15

17 Programme Wide 3.1 each Home Loan Agreement: constitutes legal, valid and binding obligations of the Borrower under such Home Loan Agreement, enforceable against such Borrower in accordance with the terms of such Home Loan Agreement; is in full force and effect and, at the date such Home Loan Agreement was entered into, each party to such Home Loan Agreement had the capacity and authority to execute such Home Loan Agreement; is one in respect of which: there are no facts or circumstances which give rise to any right of rescission, set-off, counterclaim or defence, to the obligations of the Borrower; neither the operation of any of the terms of the Home Loan Agreement nor the exercise of any right under the Home Loan Agreement will render such Home Loan Agreement unenforceable in whole or in part or subject to any right of rescission, set-off, counterclaim or defence; no such right of rescission, set-off, counterclaim or defence has been asserted with respect to such Home Loan Agreement; the Seller has no knowledge of any challenge, dispute or claim by or against the Borrower under or affecting such Home Loan Agreement or of the liquidation or insolvency of the applicable Borrower; the Seller is not (nor would with the giving of notice or lapse of time or the satisfaction of any other condition or any combination thereof be) in breach of, or in default under, its obligations arising under such Home Loan Agreement; no amounts due with respect to such Home Loan Agreement shall be reduced or impaired, as a result of: any action or inaction by the Seller in respect of periods prior to the effective date of sale and transfer of such Home Loan Agreement; or any claim by any Borrower against the Seller in respect of periods prior to the effective date of sale and transfer of such Home Loan Agreement; is capable of being assigned without the prior consent of, or notice to, the Borrower; is not subject to any option, right of first refusal, pre-emptive right or other agreement giving any person a right (whether exercisable now or in the future and whether contingent or not) to call for the sale and transfer to them or any third party of such Home Loan Agreement, and each such Home Loan Agreement is free and capable of being assigned; the Properties subject thereto are not subject to any Encumbrance; has not been ceded, assigned, transferred, made-over, sold and/or discounted by the Seller to any third party, bank, discount house, finance house and/or factoring house; is upon terms and conditions substantially and materially the same as those disclosed in writing to the Issuer; is Rand denominated; has been concluded with a Borrower who is a citizen of South Africa; was originated by or on behalf of the Seller in the ordinary course of the Seller s business, applying the Seller s standard credit approval policies and procedures at the time when the relevant Home Loan Agreement was concluded; has not been amended or modified, except in writing, and copies of all such amendments and modifications are attached to the relevant Home Loan Agreement; can be segregated and is a separately identifiable agreement on the System of the Servicer at any time after the effective date of sale and transfer of such Instalment Sale; is capable of cession and assignment to the Issuer free of any Encumbrances in terms of a legal, valid and binding Sale Agreement; 16

18 3.2 each document in respect of Related Security: is a legal, valid and binding obligation of the provider of such security, enforceable against such provider in accordance with terms of such document; is in full force and effect and each party to such document had capacity and authority to execute such document; and is capable of being assigned without the prior consent of, or notice to, the provider of such security. Transaction Specific 3.3 each Home Loan: provides that payments under such agreement are not subject to deduction or withholding; complies with all requirements of any Applicable Laws; has a maximum LTV Ratio of not more than 100% in relation to the committed loan balance; has an ITI Ratio of less than 30%; has a maximum term of 25 years and a final repayment date of no later than 31 December 2028, whichever is the earlier; is Fully Performing as at the date of purchase thereof by the Issuer; is not more than 0.5 months in arrears; is repayable in equal instalments over the term of the Home Loan; is a loan agreement secured directly or indirectly by, at least, a first ranking Mortgage Bond or first ranking Indemnity Bond over an immovable property; requires the Borrower, or the relevant body corporate on behalf of the Borrower, to take out and maintain homeowners insurance; is a loan agreement not secured by a dwelling or building under construction; has a minimum interest rate yield (or, in the case of a fixed rate loan, the net yield paid by the Derivative Counterparty) of the Prime Rate less 2.2%, and has a maximum loan amount of R

19 THE SERVICER, THE SERVICING AGREEMENT AND SERVICER UNDERTAKING AGREEMENT This section should be read in conjunction with, and is qualified in its entirety by, the detailed information contained elsewhere in this Transaction Supplement and the Programme Memorandum and in particular the section headed The Servicer and the Servicing Agreement. The Issuer will appoint SBSA as the Servicer in terms of the Servicing Agreement. The Servicer is required to administer the Participating Assets as the agent of the Issuer in accordance with the terms of the Servicing Agreement as read together with the Master Servicing Agreement. The description of the Servicer s duties contained in the Programme Memorandum applies to the Servicer s duties in terms of this Transaction provided that, in addition to such duties: in terms of the Servicing Agreement, the Servicer undertakes to advise and assist the Issuer in relation to all such steps which need to be taken in order to procure that the Issuer complies with all Applicable Laws, including, where applicable, the National Credit Act, No. 34 of 2005; and in relation to Guaranteed Home Loans, in terms of the Servicer Undertaking Agreement, the Servicer undertakes on receipt of a claim by the Issuer: if so requested, to pay over all amounts collected from the Borrower in terms of the Borrower Indemnity and/or the Indemnity Bond; or, if so requested by the Issuer or the Security SPV, to procure the transfer of the: relevant Indemnity Bond to the Issuer; or relevant Borrower Indemnity and the Indemnity Bond to the BG Guarantee Entity, and to assign to the BG Guarantee Entity the Servicer s rights and obligations under the Servicer Undertaking Agreement in relation to the claim, in full discharge of its obligations in respect of such claim; on the occurrence of a Mortgage Perfection Trigger the Servicer shall, in terms of the Servicer Undertaking Agreement: procure the transfer of all the Indemnity Bonds to the Issuer, if so requested; or if so requested by the Issuer or the Security SPV and provided that Fitch have confirmed prior to such transfer that such transfer will not cause it to downgrade the rating of the Notes in issue, procure the transfer of all the Indemnity Bonds and the Borrower Indemnity to the BG Guarantee Entity (and the Servicer shall transfer all its rights and obligations under the Servicer Undertaking Agreement to the BG Guarantee Entity); or alternatively, if so requested at any time by the Issuer or the Security SPV, the Servicer shall, in terms of the Servicer Undertaking Agreement, procure the transfer; of any or all Indemnity Bonds to the Issuer; or of any or all the Indemnity Bonds and corresponding Borrower Indemnities to the BG Guarantee Entity (and the Servicer shall transfer all its rights and obligations under the Servicer Undertaking Agreement to the BG Guarantee Entity). The Servicing Agreement provides for the manner in which the Servicer will collect all monies from Borrowers due to the Issuer, on the Issuer s behalf. Monies collected will be transferred from the Collections Account to the Transaction Account on each Payment Transfer Date unless an Enforcement Notice has been delivered to the Issuer, in which event monies collected will be transferred to the Transaction Account on a daily basis. SBSA is entitled to charge fees for its services under the Servicing Agreement payable on each Payment Date, such fees to be limited to an amount equal to the Servicing Fee calculated on the aggregate Principal Balance of the Asset Pool on the immediately preceding Determination Date exclusive of VAT. For so long as SBSA is the Servicer, the Servicing Fee payable to SBSA in accordance with the Priority of Payments will be capped at the Servicing Fee Cap. The appointment of SBSA may be terminated by the Issuer (with the consent of the Security SPV) on the happening of certain events of default, insolvency on the part of SBSA or pursuant to a breach by the Servicer of its obligations. The Servicer is entitled to resign on not less than 12 months written notice. 18

20 SBSA has disaster recovery systems and back up arrangements in place. In the event of a disaster (for these purposes, any event which disrupts on-line availability for more than 48 consecutive hours), SBSA s software will be loaded on one or more computers in a secure offsite location. The completion of recovery is to take place within 48 hours. On each Determination Date the Servicer is entitled, but not obliged, to pay into the Transaction Account an amount (a Servicer Advance ) equal to any instalments owing under a Participating Asset but unpaid prior to such Determination Date, but only if the Servicer confirms in writing that, in its reasonable opinion, the failure of the Borrower to make timeous payment of the instalment is for non credit-related reasons and is not due to a lack of funds or an invalid refusal on the part of the Borrower to make that payment. The Issuer shall reimburse the Servicer Advance together with market related interest which has accrued on such Servicer Advance (from the date of the Servicer Advance to the date of reimbursement) forthwith upon, but only to the extent that, such late instalments are paid by or on behalf of the relevant Borrower to the Issuer. Such amounts shall be paid as an Excluded Item from available funds in the Transaction Account. The obligations of the Servicer in regard to the advance of Servicer Advances do not significantly extend beyond the salient features disclosed in this Transaction Supplement and the Servicer will not support the Securitisation Scheme beyond such obligations within the meaning of the Securitisation Regulations. 19

21 THE ADMINISTRATOR AND THE ADMINISTRATION AGREEMENT This section should be read in conjunction with, and is qualified in its entirety by, the detailed information contained elsewhere in this Transaction Supplement and the Programme Memorandum and in particular the section headed The Administrator and the Administration Agreement. The Issuer will appoint SBSA as the Administrator and as its agent, to advise the Issuer in relation to the management of the Issuer Programme and to exercise the Issuer s respective rights, powers and duties under the Transaction Documents, upon the terms and conditions of the Administration Agreement. SBSA is entitled to charge an Administration Fee (exclusive of VAT) for its services under the Administration Agreement payable on each Payment Date. The appointment of SBSA may be terminated by the Issuer (with the consent of the Security SPV) on the happening of certain events of default, insolvency on the part of SBSA or pursuant to a breach by the Administrator of its obligations. The Administrator is entitled to resign on not less than 12 months written notice. 20

22 STRUCTURAL FEATURES 1. CASH MANAGEMENT Cash is managed in the manner set out below: 1.1 Account Bank In the event that the Account Bank ceases to hold the Required Credit Rating, a replacement Account Bank will be appointed in accordance with the provisions of the Bank Agreement. 1.2 Transaction Account All amounts due to the Issuer (other than amounts referred to in 1.3 below) will be paid directly on receipt thereof into the Transaction Account. Prior to the delivery of an Enforcement Notice, the Administrator and the Servicer will have joint signing authority in respect of the Transaction Account. After the delivery of an Enforcement Notice, the Security SPV will have sole signing authority in respect of the Transaction Account. 1.3 SBSA Collections Account The Servicer undertakes to procure that amounts paid by or on behalf of Borrowers in respect of the Participating Assets and paid for or to the account of the Issuer will be paid into the Collections Account and transferred, together with any interest earned, to the Transaction Account on the Payment Transfer Date, unless an Enforcement Notice has been delivered to the Issuer or the Servicer no longer has the Required Credit Rating, in which event monies collected will be transferred to the Transaction Account on a daily basis. 1.4 Other Payments The Servicer shall procure that all amounts received by the Servicer under the Participating Assets which have not specifically been provided for under 1.2 and 1.3 above and which are attributable to the Participating Assets shall be paid into the Collections Account on a daily basis. Where such amounts are not immediately identifiable as being attributable to the Participating Assets, the amounts (together with any interest earned) shall be paid into the Transaction Account immediately upon their being identified as being attributable to the Participating Assets. 1.5 Permitted Investments The Administrator may, on behalf of the Issuer and on the instructions of the Servicer, invest cash from time to time standing to the credit of the Issuer s Bank Accounts in Permitted Investments, provided that for so long as the GIC Provider has the Required Credit Rating all cash from time to time standing to the credit of the Issuer s Bank Accounts will be invested with the GIC Provider. 2. CASH RESERVE On any Payment Date, the Issuer will be required to pay an amount into the Cash Reserve, in terms of the Priority of Payments, up to the Cash Reserve Required Amount. The Cash Reserve will be available to meet certain senior fees, expenses and interest on the most senior Notes as more fully specified in the Pre-Enforcement Priority of Payments (which is summarised in the section headed Priority of Payments and set out in more detail in the Administration Agreement), on any Payment Date, in the event of a shortfall in available funds for that purpose in terms of the Priority of Payments. On each Payment Transfer Date, interest accrued on the Cash Reserve balance in the Cash Reserve up to such Determination Date, will be paid to the Transaction Account. In the event of the delivery of an Enforcement Notice declaring the Notes to be immediately due and payable, all monies in the Cash Reserve will be applied in accordance with the Post-Enforcement Priority of Payments. 3. ARREARS RESERVES 3.1 If an Arrears Reserve Trigger Event occurs and is continuing on any Determination Date, the Issuer will be obliged to pay an amount into the Arrears Reserve from the available funds up to the Arrears Reserve Required Amount on the following Payment Date pursuant to the relevant provisions of the Pre-Enforcement Priority of Payments. The Arrears Reserve will be funded out of excess spread and not out of Principal Collections. 21

23 3.2 If at any time the amount standing to the credit of the Arrears Reserves exceeds the Arrears Reserve Required Amount, the amount of such excess shall be paid to the Transaction Account. If an Enforcement Notice is delivered, all monies in the Arrears Reserves will be applied in accordance with the Post-Enforcement Priority of Payments. 4. PURCHASE RESERVE On any Payment Date during the Revolving Period, the Issuer will be required to pay Principal Collections not applied in items of the Pre-enforcement Priority of Payments to meet certain senior fees and expenses, the payment of capital and interest on the most senior Notes and the funding of Further Advances, as more fully specified in the Pre-Enforcement Priority of Payments (which is summarised in the section headed Priority of Payments and set out in more detail in the Administration Agreement), into the Purchase Reserve, in terms of the Priority of Payments. Funds in the Purchase Reserve may be used during each Interest Period: (i) to fund Redraws; (ii) to fund the acquisition of Additional Assets during the Revolving Period or the advance of Further Advances; and (iii) to meet certain senior fees and expenses, the payment of capital and interest on the most senior Notes in the Pre- Enforcement Priority of Payments, on any Payment Date, in the event of a shortfall in available funds for that purpose in terms of the Priority of Payments. Any amounts in excess of R standing to the credit of the Purchase Reserve for two consecutive Payment Dates shall be added to the Redemption Amount and applied in redeeming the Notes. On each Payment Transfer Date, interest accrued on the Purchase Reserve balance up to such Determination Date, will be paid to the Transaction Account. In the event of the delivery of an Enforcement Notice declaring the Notes to be immediately due and payable, all monies in the Purchase Reserve will be applied in accordance with the Post-Enforcement Priority of Payments. 5. REDRAW RESERVE On any Payment Date, the Issuer will be required to pay an amount into the Redraw Reserve, in terms of the Priority of Payments, up to the Redraw Reserve Required Amount. The Redraw Reserve will be available to: (i) fund Redraws and (ii) meet certain senior fees and expenses, the payment of capital and interest on the most senior Notes and the funding of Redraws, as more fully specified in the Pre-Enforcement Priority of Payments (which is summarised in the section headed Priority of Payments and set out in more detail in the Administration Agreement), in the Pre-Enforcement Priority of Payments, on any Payment Date, in the event of a shortfall in available funds for that purpose in terms of the Priority of Payments. On each Payment Transfer Date, interest accrued on the Redraw Reserve balance in the Redraw Reserve up to such Determination Date, will be paid to the Transaction Account. In the event of the delivery of an Enforcement Notice declaring the Notes to be immediately due and payable, all monies in the Redraw Reserve will be applied in accordance with the Post-Enforcement Priority of Payments. 6. INTEREST DEFERRAL EVENT In the event of the occurrence of an Interest Deferral Event on any Class of Notes, interest will not accrue nor be paid on the amount of the deferred interest in respect of such Class of Notes. 7. SUBORDINATED LOAN AGREEMENTS 7.1 SBSA and any member of the SBSA Group will be appointed as Subordinated Lenders in terms of the Subordinated Loan Agreements. The advances in terms of the Subordinated Loan Agreements shall be used to provide part of the initial funding for the Issuer on the Initial Issue Date. 7.2 The Subordinated Loans will be in the following amounts: Subordinated Loan No 1: R9,000,000; and Subordinated Loan No 2: R25,500, The Subordinated Loans will be repaid as and when cash is available to make such repayment in accordance with, and to the extent permitted by, the Priority of Payments, with the final repayment date being the Final Maturity Date of the last Tranche of Notes in issue. 7.4 There is no recourse to the Subordinated Lenders, as lenders under the Subordinated Loan Agreements, beyond the fixed contractual obligations provided for in such agreements. 22

24 7.5 The Subordinated Lenders will bear a first-loss interest in the Issuer through Subordinated Loan No 1 and a second-loss interest in the Issuer through Subordinated Loan No 2, respectively. 8. REDRAWS AND FURTHER ADVANCES 8.1 Redraws The Issuer may advance Redraws to Borrowers on any date (whether in terms of a Redraw Facility or as otherwise agreed between the Home Loan Lender and the Borrower), subject to the satisfaction of certain conditions, including that the Borrower is not then in unremedied default of any of such Borrower s obligations in terms of the Home Loan Agreement and that the Redraw will be repaid within the original duration of the Home Loan Agreement, unless rescheduled by agreement between the Home Loan Lender and the Borrower The Issuer is entitled to elect to advance Redraws to Borrowers provided that the Issuer has sufficient funds available to fund such Redraws and a Redraw Notification Trigger Event is not occurring Upon the occurrence of a Redraw Notification Trigger Event, the Servicer on behalf of the Issuer shall be obliged to notify Borrowers of any action which the Issuer intends to take in respect of the Redraw obligations as provided for in the Servicing Agreement (including, but not limited to, terminating the relevant Redraw Facility in accordance with its terms). 8.2 Further Advances The Issuer may, in its discretion, advance Further Advances to Borrowers on any given day in accordance with the provisions of the relevant Home Loan Agreements, provided that the conditions set out in the Servicing Agreement are met. Such conditions include, inter alia, that: the Revolving Period is continuing and no Stop Purchase Event has occurred; the Issuer has funds available to make such Further Advance; following the making of the Further Advance, the Portfolio Covenants are met; each relevant Further Advance, together with the balance outstanding under the relevant Home Loan Agreement immediately prior to the making of such Further Advance, does not exceed the capital amount secured by the relevant Mortgage Bond(s) or Indemnity Bond(s), as the case may be; each relevant Further Advance, together with the balance outstanding under the existing Home Loan Agreement (with the Borrower in respect of whom such Further Advance is made) immediately prior to the making of such Further Advance, satisfies the Eligibility Criteria, assessed as if such Further Advance had been acquired by the Issuer; and in respect of each Further Advance, the Home Loan Agreement with the relevant Borrower is amended, in accordance with the provisions of such Home Loan Agreement, to reflect the amended capital amount which, for the avoidance of doubt, does not exceed the capital amount secured by the relevant Mortgage Bonds or Indemnity Bonds, as the case may be, in respect of the relevant Property (excluding any amount identified as an additional sum in the relevant Mortgage Bond or Indemnity Bond). 9. ADDITIONAL ASSETS 9.1 The Issuer may during the Revolving Period acquire Additional Assets from the Seller on the terms of the Sale Agreement using monies available for the purpose in accordance with the Pre-Enforcement Priority of Payments, subject to the Notes in issue not having been redeemed and enforcement of the Security not having taken place. 9.2 Each sale and transfer of Additional Assets is subject to the satisfaction of the criteria set out in the Sale Agreement including, inter alia, the following: (i) the Additional Asset is an Eligible Asset and (ii) as a consequence of giving effect to the sale and transfer of such Additional Asset, the Portfolio Covenants are satisfied. 9.3 The Issuer may acquire eligible Participating Assets originated by or on behalf of SBSA subject to the Issuer entering into suitable Derivative Contracts with Derivative Counterparties so as to ensure that no interest rate basis mismatch will exist between the Notes in issue and the Participating Assets. The purchase of such loans is further subject to, inter alia: (i) the relevant provisions of the Sale Agreement being applicable to such sale, 23

25 thereby constituting a legal, valid, binding and enforceable agreement and (ii) the Participating Assets complying with the Eligibility Criteria. 10. PRINCIPAL DEFICIENCY LEDGER 10.1 A Principal Deficiency Ledger will be established to record the Principal Deficiency (if any) on each Determination Date, calculated by deducting the Assets expected to exist (after having made all payments in accordance with the Priority of Payments) as at the close of business on the immediately succeeding Interest Payment Date from the Liabilities expected to exist (after having made all payments in accordance with the Priority of Payments) as at the close of business on the immediately succeeding Interest Payment Date, where Liabilities means: the aggregate Outstanding Principal Amount of the Notes on the last day of the immediately preceding Collection Period; less the amount allocated in the Pre-Enforcement Priority of Payments for the redemption of the Notes on the immediately succeeding Interest Payment Date; and Assets means: the aggregate outstanding Principal Balances of the Participating Assets on the last day of the immediately preceding Collection Period, excluding any Non-Performing Loans; plus the amount allocated in the Pre-Enforcement Priority of Payments to advance Redraws and advance Further Advances and purchase Additional Assets on the immediately succeeding Interest Payment Date; plus the aggregate principal amount of Redraws and Further Advances advanced since the previous Collection Period and expected to be made up to the immediately succeeding Interest Payment Date, provided that the Principal Deficiency shall never be less than zero. 11. REVOLVING PERIOD 11.1 The Revolving Period comprises the period commencing on (and including) the Initial Effective Date and ending on the occurrence of a Stop Purchase Event or upon the first Business Day following the expiry of 3 years commencing from the Initial Effective Date, whichever occurs first, unless the Issuer elects to shorten the Revolving Period by giving 5 Business Days notice to the Security SPV, the Noteholders and the Servicer in which case the Revolving Period will end on the date on which such notice expires During the Revolving Period, if the amount allocated for the purchase of Additional Assets or the advance of Further Advances is not fully utilised due to insufficient Eligible Assets offered to the Issuer for purchase or insufficient Further Advances advanced by the Issuer then such unutilised cash shall be paid into the Purchase Reserve. Any amounts in excess of R standing to the credit of the Purchase Reserve for two consecutive Payment Dates shall be added to the Redemption Amount and applied in redeeming the Notes. 12. MORTGAGED HOME LOANS AND GUARANTEED HOME LOANS 12.1 Participating Assets fall into the following two categories: Mortgaged Home Loans; and Guaranteed Home Loans In relation to Mortgaged Home Loans, both the Home Loan and the relevant Mortgage Bond will be transferred to the Issuer in terms of the provisions of the Sale Agreement. 24

26 12.3 In relation to Guaranteed Home Loans, whilst only the Home Loan is transferred to the Issuer in terms of the provisions of the Sale Agreement, the Issuer s rights against the Borrower on default under the Home Loan Agreement are secured in terms of the Servicer Undertaking Agreement. The Borrower indemnifies the Seller in terms of the Borrower Indemnity against, amongst other things, any claims by the Issuer under the Servicer Undertaking Agreement and as security for the Borrower s obligations under the Borrower Indemnity, the Borrower registers an Indemnity Bond in favour of the Seller. The Servicer Indemnity Undertaking is limited to the amounts the Seller is able to recover from the Borrower under the Borrower Indemnity and the Indemnity Bond. The Servicer Undertaking Agreement also provides that, in the alternative to a claim for payment under the Servicer Undertaking Agreement, if requested by the Issuer or the Security SPV, the Servicer shall procure the transfer of the Indemnity Bond to the Issuer or, alternatively, if requested by the Issuer or the Security SPV, the Servicer shall procure the transfer of the relevant Indemnity Bond and Borrower Indemnity to the BG Guarantee Entity, together with the assignment to the BG Guarantee Entity of the Servicer s rights and obligations under the Servicer Undertaking Agreement in relation to the claim On the occurrence of a Mortgage Perfection Trigger the Servicer shall, in terms of the Servicer Undertaking Agreement: procure the transfer of all the Indemnity Bonds to the Issuer, if so requested; or if so requested by the Issuer or the Security SPV and provided that Fitch have confirmed prior to such transfer that such transfer will not cause it to downgrade the rating of the Notes in issue, procure the transfer of all the Indemnity Bonds and the Borrower Indemnities to the BG Guarantee Entity (and the Servicer shall transfer all its rights and obligations under the Servicer Undertaking Agreement to the BG Guarantee Entity) Alternatively, if so requested at any time by the Issuer or the Security SPV (provided no Mortgage Perfection Trigger has occurred), the Servicer shall, in terms of the Servicer Undertaking Agreement, procure the transfer: of any or all Indemnity Bonds to the Issuer; or of any or all the Indemnity Bonds and corresponding Borrower Indemnities to the BG Guarantee Entity (and the Servicer shall transfer all its rights and obligations under the Servicer Undertaking Agreement to the BG Guarantee Entity) Hedging Home Loans held by the Issuer may yield income in accordance with a fixed rate of interest whilst a Series of Notes may pay a floating rate of interest, or vice versa, resulting in interest rate mismatches. The Issuer may also be exposed to basis risk in that the reset dates of the interest rates payable in respect of its assets may be different to the reset dates of the interest payable in respect of the Notes. In order to hedge against, amongst others, interest rate mismatches and basis risk, the Issuer may enter into one or more hedging agreements from time to time with a Derivative Counterparty (with the Required Credit Rating, if applicable) to ensure that such risks are appropriately hedged. 25

27 PRIORITY OF PAYMENTS 1. PRE-ENFORCEMENT OF PRIORITY OF PAYMENTS 1.1 On each Payment Date, monies standing to the credit of the Transaction Account as of the immediately preceding Determination Date and, to the extent that such monies are insufficient, all monies standing to the credit of the Cash Reserve, the Arrears Reserves, the Redraw Reserve and the Purchase Reserve as of the immediately preceding Determination Date (save that such monies shall only be applied to meet the relevant expenses set out in the Administration Agreement), shall after making payment of or providing for amounts owing in respect of the Excluded Items, until enforcement of the Security for the Notes, be transferred from the Transaction Account and the Cash Reserve, the Arrears Reserves, the Redraw Reserve and the Purchase Reserve in accordance with the procedures provided for in the Administration Agreement. Such monies shall be applied on each Payment Date in the detailed order set out in Appendix 2 to the Administration Agreement, an abridged and simplified version of which is set out below: to pay or provide for (in the order set out in Appendix 2 to the Administration Agreement) senior expenses such as Taxes and any statutory fees, costs and expenses due and payable by the Issuer in order to preserve the corporate existence of the Issuer; the remuneration due and payable to the Security SPV and/or the Security SPV Owner Trustee and to the Owner Trustee; all fees, costs, charges, liabilities and expenses (inclusive of VAT, if any) due and payable by the Issuer to third parties and incurred without breach by the Issuer of its obligations under the Transaction Documents and not provided for payment elsewhere and the Servicing Fee up to the Servicing Fee Cap; to pay pari passu and pro rata all amounts due and payable in respect of the Class A Notes other than in respect of principal and any net settlement amounts and Derivative Termination Amounts due and payable to any Derivative Counterparty in accordance with the Derivative Contracts (but excluding any Derivative Termination Amounts where the Derivative Counterparty is in default); to pay or provide for in descending order of rank all amounts due and payable in respect of the Class B to Class F Notes other than in respect of principal on such Notes, subject to an Interest Deferral Event not occurring; subject to an Arrears Reserve Trigger Event having occurred and continuing on such Payment Date and an Interest Deferral Event not occurring, to credit pari pasu and pro rata each of the Arrears Reserves up to the relevant portion of the Arrears Reserve Required Amount. In the event that an Interest Deferral Event occurs in respect of a Class of Notes, the Arrears Reserve in respect of such Class of Notes will not be credited; while the Class A Notes remain outstanding: to credit the Cash Reserve up to the Cash Reserve Required Amount; to credit the Redraw Reserve up to the Redraw Reserve Required Amount; to fund the advance by the issuer of Redraws up to an amount equal to the Potential Redemption Amount less the amounts specified in the Priority of Payments; during the Revolving Period only: to fund the advance by the Issuer of Further Advances up to an amount equal to the Potential Redemption Amount less the amounts specified in the Pre- Enforcement Priority of Payments; to fund the purchase by the Issuer of Additional Assets or to set aside cash for such funding; to credit Principal Collections received and not applied in items to above to the Purchase Reserve; to redeem, in descending order of rank, the Notes equal to the greater of zero and the difference between the Potential Redemption Amount and the sum of the amounts specified in the Priority of Payments; if there are no Class A Notes outstanding, 1.1.4, and are repeated in respect of the remaining Classes of Notes in descending order of rank and the remaining Notes are redeemed in 26

28 descending order of rank as set out in , provided that an amount to be applied in redeeming the Class B Notes up to an amount equal to the Principal Deficiency on such Payment Date will be allocated before the Cash Reserve and the Redraw Reserve are credited; similarly, if there are no Class A and Class B Notes outstanding (and thereafter no Class C and Class D Notes outstanding, respectively), 1.1.4, and are repeated in respect of the remaining Classes of Notes in descending order of rank and the remaining Notes are redeemed in descending order of rank as set out in , provided that an amount to be applied in redeeming in descending order of rank the remaining Notes up to an amount equal to the Principal Deficiency on such Interest Payment Date will be allocated before the Cash Reserve and the Redraw Reserve are credited; if a Class B Interest Deferral Event occurs on such Interest Payment Date, to pay pari passu and pro rata: all amounts due and payable in respect of Class B Notes other than in respect of principal on the Class B Notes; and in the event that a substitute Servicer assumes the role of Servicer, the Subordinated Servicing Fee due and payable to the substitute Servicer on such Interest Payment Date, if any (inclusive of VAT); if a Class B Interest Deferral Event occurs on such Interest Payment Date and subject to an Arrears Reserve Trigger Event having occurred and continuing on such Interest Payment Date, to credit the Arrears Reserve B up to the relevant proportion of the Arrears Reserve Required Amount; if an Interest Deferral Event occurs on such Interest Payment Date in respect of the Class C to Class F Notes, to pay in descending order of rank all amounts due in respect of the Class C Notes to Class F Notes other than in respect of principal on such Notes; to pay or provide for any capital amounts due and payable to the Subordinated Lender in accordance with the provisions of the Subordinated Loan Agreements, provided that the Notes have been redeemed in full; to pay or provide for the Derivative Termination Amounts due and payable to any Derivative Counterparty under the Derivative Contracts where the Derivative Counterparty is in Default; provided that the Issuer has not exercised the Early Redemption Option to pay or provide for any amounts, other than capital, due and payable to the Subordinated Lender in accordance with the provisions of the Subordinated Loan Agreements in descending order of rank; to pay or to provide for the dividend due and payable to the Preference Shareholder; and while any amounts (whether actual or contingent) are outstanding to Secured Creditors, the surplus, if any, to be invested in Permitted Investments and, only once all the obligations (whether contingent or otherwise) to Secured Creditors have been discharged in full, to pay the surplus, if any, to the ordinary shareholders of the Issuer. 2. POST-ENFORCEMENT PRIORITY OF PAYMENTS 2.1 After the Security SPV has given notice to the Issuer pursuant to an Event of Default, declaring the Notes to be due and payable, no Additional Assets may be purchased and no Further Advances or Redraws may be advanced. The available funds in the Transaction Account on each Payment Date (including monies in the Cash Reserve, the Arrears Reserves, the Redraw Reserve and the Purchase Reserve) will be applied on each Payment Date in the order set out in Appendix 2 to the Administration Agreement, an abridged and simplified version of which is set out below: To pay or provide for senior expenses referred to in above; To pay or provide for pari passu and pro rata: any net settlement amounts and Derivative Termination Amounts due and payable to any Derivative Counterparty in accordance with the Derivative Contracts (but excluding any Derivative Termination Amounts where the Derivative Counterparty is in default); and interest, principal and all other amounts due and payable in respect of each Series of the Class A Notes; 27

29 2.1.3 to pay or provide for interest, principal and all other amounts due and payable in respect of each Class of Notes (other than the Class A Notes), in descending order of rank and with Notes of equal rank being paid pari passu and pro rata, until all such amounts due and payable in respect of each such Class of Notes have been paid in full; it being recorded that no payment of any amount shall be paid to any Noteholders of a Class of Notes until such time as the amounts due and payable in respect of all Classes of Notes having a higher rank have been paid in full; to pay or provide for the Derivative Termination Amounts due and payable to any Derivative Counterparty under the Derivative Contracts where the Derivative Counterparty is in default; to pay or provide for any fees, interest and capital amounts due and payable to the Subordinated Lender in accordance with the provisions of the Subordinated Loan Agreements in descending order of rank, until all amounts due and payable in respect of the Subordinated Loan Agreement (Second Loss) have been paid in full and thereafter to pay or provide for fees, interest and capital amounts due and payable under the Subordinated Loan Agreement (First Loss); to pay or provide for the dividend due and payable to the Preference Shareholder; and to pay the surplus, if any, to the ordinary shareholders of the Issuer. 2.2 In respect of the Post-Enforcement Priority of Payments, the amount allocated for payment of each Class of Notes shall first be allocated to interest and then to principal. 3. GENERAL 3.1 In respect of each Priority of Payments, the monies available for distribution shall, after making payment of or providing for Excluded Items, be applied in making payments or provisions in accordance with the relevant Priority of Payments, on the basis that a Secured Creditor which ranks subsequent to any other creditors in the relevant Priority of Payments will not be paid unless and until all the creditors which rank prior to it in the relevant Priority of Payments have been paid all of the amounts then due and payable to them by the Issuer or amounts accrued up to the relevant Payment Date, but not yet payable, have been provided for (by setting aside cash for this purpose in the Transaction Account). 3.2 The Excluded Items shall be paid when such amounts are due and payable. 28

30 THE SALE AGREEMENT 1. SALE AGREEMENT The Issuer will enter into the Sale Agreement with the Seller in terms of which the Issuer purchases, and the Seller sells, all of the Seller s right, title and interest in and to a portfolio of Participating Assets. The portfolio will be identified in a schedule to the Sale Agreement following a pool cut by the Seller of Eligible Assets on the Cut-Off Date. Additional Assets which satisfy the Eligibility Criteria may be purchased by the Issuer during the Revolving Period. 2. ELIGIBILITY CRITERIA On origination of each Participating Asset from time to time, the Seller s standard credit approval policies and procedures will have been applied. The general criteria that each Participating Asset must satisfy in order to qualify for acquisition by the Issuer are set out in the Sale Agreement and include, inter alia, the criteria set out in the section of this Transaction Supplement headed The Home Loan Pool. 3. WAIVER IN RELATION TO INDEMNITY BONDS The Sale Agreement provides that the Seller waives all and any rights to proceed against the Borrower under the Indemnity Bond after transfer of the relevant Guaranteed Home Loan save in respect of a claim under the Borrower Indemnity. 4. PORTFOLIO COVENANTS The criteria that the aggregate portfolio of Participating Assets owned by the Issuer must satisfy, at the Effective Date of the acquisition of each Participating Asset following the acquisition of such Participating Asset, and following the substitution of a Participating Asset by the Seller as set out in the Sale Agreement are as follows: 4.1 the aggregate Principal Balance of the Participating Assets of self-employed Borrowers will not exceed 25% of the aggregate Principal Balance of the portfolio of Participating Assets owned by the Issuer; 4.2 the aggregate Principal Balance of the Participating Assets where Properties securing such Participating Assets are not owner occupied will not exceed 20% of the aggregate Principal Balance of the portfolio for Participating Assets owned by the Issuer; 4.3 the weighted average interest rate yield earned on the Participating Assets will not drop to a level lower than 0.2% below the level of the interest rate yield of the Initial Asset Pool determined relative to the prevailing Prime Rate; 4.4 the weighted average LTV Ratio of the Participating Assets will not exceed the weighted average LTV Ratio of the Initial Asset Pool as at the later of the date of origination thereof and the date of the most recent valuation of the Participating Asset by more than 1%; and 4.5 the weighted average ITI Ratio of the Participating Assets will not exceed the weighted average ITI Ratio of the Initial Asset Pool as at the later of the date of origination thereof and the date of the most recent proof of income by more than 1%. In respect of 4.1 and 4.2 the Seller and the Issuer will be relying on information furnished by the Borrower to the Seller and the Issuer. Neither the Seller nor the Issuer will independently verify the accuracy or correctness of the information supplied by the Borrowers in this regard. 5. EFFECTIVE DATE AND PURCHASE PRICE 5.1 The Effective Date of the sale by the Seller to the Issuer of each Participating Asset shall be the Initial Effective Date and thereafter shall be the Top-Up Date subject to payment of the Purchase Price to the Seller. 29

31 5.2 The Purchase Price payable by the Issuer to the Seller in respect of each Participating Asset, shall be equal to: the Principal Balance of such Participating Asset on the Principal Balance Date; plus any amounts charged in respect of such Participating Asset to the Borrower s account but unpaid on such Principal Balance Date (including, for the avoidance of doubt, Accrued Interest). 5.3 Such Purchase Price shall be paid on the Effective Date as contemplated in the Sale Agreement. 6. WARRANTIES AND PURCHASE 6.1 The Sale Agreement contains certain warranties given by the Seller to the Issuer at the Effective Date in relation to, inter alia, the Participating Assets sold and transferred to the Issuer pursuant to the Sale Agreement. The warranties do not relate to the future credit-worthiness of the Borrowers in terms of the Participating Assets and do not relate to matters that do not fall within the control of the Seller. 6.2 No searches, enquiries or independent investigation of title have been or will be made by the Issuer or the Security SPV, each of whom is relying entirely on the warranties set out in the Sale Agreement. 6.3 Subject to 7 and 8 below, if there is an unremedied breach of any of the warranties set out in the Sale Agreement then the Seller will be obliged to purchase the relevant Participating Asset and its Related Security for a consideration in cash equal to the outstanding principal and all other sums due or owing thereunder including accrued interest as at the date of purchase and pay to the Issuer such damages as the Issuer may have suffered in connection with such breach of warranty to the extent to which those damages have not been extinguished by that purchase. The Seller also indemnifies the Issuer in respect of any claims made against the Issuer by any third party as a result of or arising out of or in connection with such breach. Performance of such purchase, payment of damages (if applicable) and indemnification will be in full satisfaction of the liabilities of the Seller in respect of the relevant breach. 6.4 The warranties of the Seller referred to above include warranties that, prior to making an advance to a Borrower, the Borrower complied in full with all the Credit Criteria. 6.5 Save as set out above, the Issuer has no right of recourse against the Seller, acting in a primary role, in respect of losses incurred in connection with the Participating Assets after the transfer thereof to the Issuer in terms of the Securitisation Scheme. 7. NOTIFICATION TRIGGER On the happening of a Notification Trigger Event, the Servicer shall notify each of the Borrowers of, amongst other things, the sale and transfer of the Participating Assets to the Issuer in terms of the Sale Agreement and the requirement for payment to be made directly to the Issuer. 8. REPURCHASE OPTION 8.1 The Seller has the right, but not the obligation (save as contemplated in 6.3 above), to repurchase Participating Assets, from the Issuer. 8.2 Such repurchase will only be permitted to the extent that the aggregate Principal Balances of the Home Loan Agreements repurchased during the term of the Sale Agreement do not, in the aggregate, exceed 10% of the aggregate Principal Balances of the Home Loan Agreements on the Cut-Off Date, unless the Registrar of Bank grants written approval to allow such 10% limit to be exceeded. 8.3 The repurchase is subject to the normal credit approval and review processes of the Seller. 8.4 Where a Participating Asset to be repurchased is a Performing Asset, the Seller may only repurchase such Performing Asset where the Issuer has given notice of the exercise of the Clean-Up Call Option. 8.5 The Seller may repurchase a Non-Performing Loan only if the external auditors of the Seller have certified in writing that such Non-Performing Loan is being acquired at fair market value, which value reflects the nonperforming status of such Participating Asset. 30

32 9. REPLACEMENT ASSETS The Seller has the right, but not the obligation, to replace a Performing Asset with another Eligible Asset(s) of equivalent credit quality provided that such Eligible Asset(s) will, after replacement, comply with the Portfolio Covenants and provided further that the Replacement Asset (as defined in the Sale Agreement) has the same rate of interest as the Predecessor Asset (as defined in the Sale Agreement). 10. SERVICER CALL OPTION The Servicer has been granted the Servicer Call Option in the Sale Agreement. 11. RIGHT OF FIRST REFUSAL In the event that the Issuer wishes to sell all but not some only of its Participating Assets, the Issuer shall serve notice in writing upon the Servicer of its intention to sell such Participating Assets and shall first offer the Participating Assets to the Servicer. The Sale Agreement sets out the terms and conditions for the exercise of the right of first refusal by the Servicer. 31

33 TRANSACTION SPECIFIC DEFINITIONS 1. Terms and expressions set out below will have the meanings set out below in the Terms and Conditions and the other Transaction Documents, unless such term is separately defined in the Applicable Pricing Supplement or the Transaction Documents or the context otherwise requires: 1.1 Accredited Valuer any of those property valuers appointed by the Servicer from time to time in accordance with SBSA s customary policy regarding the appointment of valuers, as updated from time to time; 1.2 Adjusted Principal Deficiency the Principal Deficiency having taken account of any credit balance of the Arrears Reserves, the Cash Reserve, the Redraw Reserve and the Purchase Reserve in the Transaction Account; 1.3 Arrears Reserve the Arrears Reserve A, the Arrears Reserve B, the Arrears Reserve C, the Arrears Reserve D and the Arrears Reserve E, which are funded from excess spread and not Principal Collections; 1.4 Arrears Reserve A as defined in the Common Terms Agreement; 1.5 Arrears Reserve B as defined in the Common Terms Agreement; 1.6 Arrears Reserve C as defined in the Common Terms Agreement; 1.7 Arrears Reserve D as defined in the Common Terms Agreement; 1.8 Arrears Reserve E as defined in the Common Terms Agreement; 1.9 Arrears Reserve F as defined in the Common Terms Agreement; 1.10 Arrears Reserve Required Amount the amount equal to the aggregate Principal Balances of the Participating Assets of the Issuer in respect of which there are arrears of an amount greater than 3 months instalments, plus Accrued Interest on such Participating Assets, less 60% of the values of the Properties in respect of such Participating Assets based on the lower of the original valuation by an Accredited Valuer and, if applicable, a subsequent valuation by an Accredited Valuer; 1.11 Arrears Reserve Trigger Event shall occur on any Determination Date where the aggregate Principal Balances of Participating Assets of the Issuer in respect of which there are arrears of an amount greater than 3 months instalments, exceeds 0.8% of the aggregate Principal Balances of the Participating Assets in the Initial Asset Pool and shall cease when such percentage reduces to 0.6%; provided that for the purposes of this definition, a Borrower shall not be deemed to be in arrears if the obligations of the Borrower under the Home Loan Agreement are guaranteed by a financial institution; 1.12 Bank Accounts the Transaction Account; 1.13 BG Guarantee Entity an entity to be formed by the Servicer in accordance with the Servicer Agreement; or an entity, other than SBSA, which has been identified by the Issuer or the Security SPV, to which the rights and obligations of the Servicer under the Indemnity, Indemnity Bonds and the Servicer Undertaking Agreement are to be assigned in accordance with either the Sale Agreement or the Servicer Undertaking Agreement, as applicable; 1.14 Cash Management Trigger the Servicer as notified by the Rating Agency of a down-grade in the Required Credit Rating of the Servicer, as more fully contemplated in Appendix 5 of the Servicing Agreement; 32

34 1.15 Cash Reserve Capture Trigger will occur if, and for so long as, the credit rating of the Servicer falls below the Required Credit Rating; 1.16 Cash Reserve Required Amount on the Initial Issue Date and any subsequent Interest Payment Date, the greater of: an amount equal to 2.75% of the greater of the aggregate of the Principal Balances of the Participating Assets of the Issuer or the Outstanding Principal Amount of the Notes in issue from time to time after the application of funds on the relevant Payment Date, or such lower amount as is notified in writing to the Rating Agency and which the Rating Agency does not notify the Issuer in writing may cause it to downgrade or withdraw its respective current Ratings of the Notes in issue; if a Cash Reserve Capture Trigger occurs, an amount equal to the amount of interest due and payable on the Notes on the next following Interest Payment Dates for the next 2 Interest Periods funded from excess spread; and % of the Outstanding Principal Amount of the Notes in issue on the Initial Issue Date; 1.17 Class A Redemption Amount as defined in the Common Terms Agreement; 1.18 Class B Interest Deferral Event as defined in the Common Terms Agreement; 1.19 Class B Principal Lock-Out as defined in the Common Terms Agreement; 1.20 Class B Redemption Amount as defined in the Common Terms Agreement; 1.21 Class C Interest Deferral Event as defined in the Common Terms Agreement; 1.22 Class C Principal Lock-Out as defined in the Common Terms Agreement; 1.23 Class C Redemption Amount as defined in the Common Terms Agreement; 1.24 Class D Interest Deferral Event as defined in the Common Terms Agreement; 1.25 Class D Principal Lock-Out as defined in the Common Terms Agreement; 1.26 Class D Redemption Amount as defined in the Common Terms Agreement; 1.27 Class E Interest Deferral Event as defined in the Common Terms Agreement; 1.28 Class E Principal Lock-Out as defined in the Common Terms Agreement; 1.29 Class E Redemption Amount as defined in the Common Terms Agreement; 1.30 Class F Redemption Amount as defined in the Common Terms Agreement; 1.31 Class F Interest Deferral Event as defined in the Common Terms Agreement; 1.32 Class F Principal Lock-Out as defined in the Common Terms Agreement; 1.33 Collection Period in relation to the first Collection Period the period beginning on (and including) the Initial Effective Date and ending on (and including) the immediately succeeding Determination Date and in relation to subsequent Collection Periods, the period beginning on (but excluding) the Determination Date and ending on (and including) the next Determination Date; 1.34 Collections Account Account Name: Home Loans Bucket Account; Branch Code: 4255; Branch Name: Home Loans; Account Holder: Home Loans; Account Number: ; 33

35 1.35 Cut-Off Date 2 May 2006; 1.36 Derivative Counterparty SBSA or any other person (provided it has the Required Credit Rating, if applicable) with whom the Administrator concludes agreements on behalf of the Issuer to hedge the Issuer s interest rate, basis or other similar risks; 1.37 Determination Date the 10th Business Day preceding (but excluding) a Payment Date; 1.38 Dividend Payment Date the same date as the Interest Payment Date; 1.39 Excluded Items means: monies which properly belong to third parties (including monies owing to any party in respect of reimbursement for direct debit recalls and insurance premiums owing to Insurers); amounts payable to the Seller under the Sale Agreement in respect of reconciliations of the amounts paid in respect of the purchase and/or substitution of any Participating Assets; the acquisition of Participating Assets from the Seller using the net proceeds received by the Issuer from a Tranche(s) of Notes issued for this purpose; the redemption of Notes using the net proceeds received by the Issuer from a Tranche(s) of Notes issued for this purpose; amounts corresponding to the aggregate Redraws which are advanced by the Issuer to Borrowers on any day, in accordance with the terms and conditions of the Servicing Agreement; during the Revolving Period only, amounts corresponding to the aggregate Further Advances which are advanced by the Issuer to Borrowers on any day, in accordance with the terms and conditions of the Servicing Agreement; any amounts paid by the Servicer into the Transaction Account in terms of the Servicing Agreement in respect of instalments owing under a Participating Asset but unpaid on any Determination Date for non credit-related reasons, which instalments have subsequently been received by the Issuer; all of which items rank above all other items in the Priority of Payments; 1.40 Fully Performing means: in respect of all Participating Assets, other than Participating Assets where and are applicable, a Participating Asset where a full month s payment has been received within the last 38 calendar days and based on scheduled payments for the previous 12 months or, where the loan was granted within the last 12 months, then for the period since payments were scheduled to commence, as at the date of any month end calculation, none of the following criteria with regard to such Home Loan has occurred during such period: the ratio of the Arrears Balance to the then monthly instalment is 2 or more; or 34

36 no scheduled payments or Repayments have been made for more than 60 calendar days in circumstances where a Borrower has an arrears credit; 1.41 Further Advance an advance by the Home Loan Lender of an additional loan in accordance with the terms of the relevant Home Loan Agreement; 1.42 Home Loan a loan (being an Initial Asset, Replacement Asset or an Additional Asset), in each case comprising the aggregate of all advances, Redraws (including those funded by the Issuer) and Further Advances, less Prepayments and Repayments, made in terms of the relevant Home Loan Agreement (including, where applicable, the relevant Redraw Facility) by a Home Loan Lender to a Borrower and from time to time outstanding (including all capital sums); 1.43 Initial Effective Date subject to the terms of the Sale Agreement, 19 June 2006; 1.44 Interest Deferral Event a Class B Interest Deferral Event, a Class C Interest Deferral Event, a Class D Interest Deferral Event, a Class E Interest Deferral Event or a Class F Interest Deferral Event; 1.45 Issuer Blue Granite Investments No. 2 (Proprietary) Limited, a company with limited liability registered and incorporated in accordance with the laws of South Africa under registration number 2006/007779/07 and its successors-in-title and assigns; 1.46 ITI Ratio instalment to income ratio, being the ratio of the minimum required instalment payable under a Home Loan Agreement to the combined gross monthly income of the Borrower concerned and such Borrower s spouse and/or live-in partner and/or any Surety for such Borrower (which income comprises basic salary, travel allowance, one-twelfth of any guaranteed thirteenth cheque, plus or minus any maintenance amounts, administration orders or garnishee amounts payable by or to the Borrower, such Borrower s spouse and/or live-in partner and/or any Surety for such Borrower, investment income (to the extent approved by the Security SPV), the average of the last 6 months commission and the net rental income from any property other than the Property in respect of which the Mortgage Bond or Indemnity Bond concerned is to be registered); 1.47 Mortgage Perfection Trigger any one or more of the following events: SBSA is notified by the Rating Agency of a downgrade in the Required Credit Rating of the Servicer; and/or the occurrence of a Material Adverse Effect in relation to the Administrator and/or the Servicer, as reasonably determined by the Issuer or the Security SPV; 1.48 Non-Performing Loan at the end of the most recent Collection Period, a Participating Asset which is classified by the Servicer as being non-performing in accordance with the Servicer s standard procedures from time to time; 1.49 Notification Trigger Event any one or more of the following events: SBSA is notified by the Rating Agency of a downgrade in the Required Credit Rating of the Servicer; and/or SBSA suffers a Material Adverse Effect, as reasonably determined by the Issuer or the Security SPV; 1.50 Originator SBSA; 35

37 1.51 Payment Date the 21st day of June, September, December and March each year or, if such day is not a Business Day, the immediately succeeding Business Day; 1.52 Payment Transfer Date the Business Day preceding (but excluding) a Payment Date; 1.53 Performing Asset a Participating Asset which is not a Non-Performing Loan; 1.54 Potential Redemption Amount an amount determined on each Determination Date as follows: Principal Collections (less Recoveries) received during the most recent Collection Period; plus Repayments and Prepayments used to advance Redraws and Further Advances during the immediately preceding Collection Period; plus the difference between the Redraw Reserve Required Amount and the balance in the Redraw Reserve expressed as a positive amount; plus any amounts in excess of R standing to the credit of the Purchase Reserve for the previous two consecutive Interest Payments Dates; plus the difference between the Cash Reserve Required Amount and the Redraw Reserve Required Amount at the previous Interest Payment Date and the Cash Reserve Required Amount and the Redraw Reserve Required Amount on the following Interest Payment Date, provided that the difference is a positive amount; plus an amount equal to the balance recorded on the Adjusted Principal Deficiency Ledger on the previous Determination Date, provided that the Potential Redemption Amount shall never be less than zero; 1.55 Prime or Prime Rate the Prime Rate, as defined in the Programme Memorandum; 1.56 Principal Balance Date in relation to: Participating Assets sold and transferred on the Initial Effective Date, the close of business on the Business Day immediately preceding 15 June 2006; and Participating Assets sold and transferred during the Revolving Period, the close of business on the Effective Date of such sale; 1.57 Principal Deficiency on any Determination Date an amount equal to the Liabilities expected to exist, after having made all payments in accordance with the Priority of Payments, as at close of business on the immediately succeeding Interest Payment Date less the Assets expected to exist, after having made all payments in accordance with the Priority of Payments, as at close of business on the immediately succeeding Interest Payment Date, where Liabilities and Assets have the meanings set out in paragraph 9 under the section of this Transaction Supplement headed Structural Features ; 1.58 Purchase Price subject to the terms of the Sale Agreement, in respect of each Participating Asset, an amount equal to: the Principal Balance of such Home Loan Agreement on the Principal Balance Date; plus the Accrued Interest on such Participating Asset on the Principal Balance Date; plus 36

38 any amounts charged in respect of such Participating Asset to the Borrower s account but unpaid on the Principal Balance Date; 1.59 Recoveries proceeds from the sale of Properties and the amount of any Non- Performing Loans which were taken into account to determine the Principal Deficiency which have subsequently been recovered; 1.60 Redemption Amount the amount allocated for redemption of the Notes in terms of the Pre-Enforcement Priority of Payments; 1.61 Redraw a re-advance to a Borrower including a re-advance in terms of the Redraw Facility; 1.62 Redraw Facility in relation to any Home Loan, the facility (whether described as an Access Bond Facility or otherwise) which, if granted by the Seller (or its assignee) in the form of a written facility agreement signed by both the Seller (or its assignee) and the Borrower, enables the Borrower to make a Redraw, subject to the terms of the Home Loan Agreement; 1.63 Redraw Notification Trigger Event will occur when: the monies standing to the credit of the of the Redraw Reserve drops to below one third of the Redraw Reserve Required Amount ( Redraw Threshold ) and remains below the Redraw Threshold for a continuous period of 10 Business Days prior to but excluding, the relevant Determination Date; and/or on the relevant Determination Date, the aggregate Principal Balances of Home Loans of the Issuer in respect of which there are arrears of an amount greater than 3 months instalments exceeds 1.2% of the aggregate Principal Balances of the Participating Assets in the Initial Asset Pool but shall cease when such percentage reduces to 0,9%; 1.64 Redraw Reserve Required Amount on the Initial Issue Date and any subsequent Interest Payment Date, an amount equal to 2.25% of the greater of the aggregate of the Principal Balances of the Participating Assets of the Issuer and the Outstanding Principal Amount of the Notes in issue from time to time after the application of funds on the relevant Payment Date, or such lower amount as may be notified in writing by the Rating Agency provided such lower amount will not cause the Rating Agency to downgrade or withdraw its current Ratings of the Notes in Issue; 1.65 Related Security as that term is defined in the Master Programme provided that, in relation to this Transaction, the security specified in such definition shall exclude, in relation to Guaranteed Home Loans, the Guarantee Entity Guarantee (referred to in this Transaction as the Servicer Undertaking Agreement) and each relevant Indemnity Bond save for any cession of rights in relation to rental proceeds or SASRIA claims in respect of the relevant Property provided for such Indemnity Bond; 1.66 Revolving Period the period commencing on (and including) the Initial Effective Date and ending on the occurrence of a Stop Purchase Event or upon the first Business Day following the expiry of 3 years commencing from the Initial Issue Date, whichever occurs earlier, unless the Issuer elects to shorten the Revolving Period by giving 5 Business Days notice to the Security SPV, the Noteholders and the Servicer in which case the Revolving Period will end on the date on which such notice expires; 37

39 1.67 Required Credit Rating means: where the Rating Agency is Fitch: in the case of a Mortgage Perfection Trigger in respect of the Servicer: (i) if a national scale, national currency credit rating has been assigned to the investment or entity, then at least F1+(zaf) by Fitch on a short-term scale and at least AA-(zaf) on a long-term scale or, in the case of any other Rating Agency (where applicable) the equivalent short-term or longterm national scale rating of such Rating Agency and (ii) in the absence of such a national scale, national currency credit rating, if a global scale credit rating has been assigned to the investment or entity, then the equivalent short-term or long-term global scale credit rating of such Rating Agency; or in the case of Permitted Investments with a term of 30 days or less: (i) if a national scale, national currency credit rating has been assigned to the investment or entity, then at least F1(zaf) by Fitch on a short-term scale and at least A(zaf) on a long-term scale or, in the case of any other Rating Agency (where applicable) the equivalent short-term or longterm national scale rating of such Rating Agency and (ii) in the absence of such a national scale, national currency credit rating, if a global scale credit rating has been assigned to the investment or entity, then the equivalent short-term or long-term global scale credit rating of such Rating Agency; or in the case of Permitted Investments with a term of more than 30 days but less than 364 days: (i) if a national scale, national currency credit rating has been assigned to the investment or entity, then at least F1 +(zaf) by Fitch on a short-term scale and at least AA (zaf) on a long-term scale or, in the case of any other Rating Agency (where applicable) the equivalent short-term or long-term national scale credit rating of such Rating Agency and (ii) in the absence of such a national scale, national currency credit rating, if a global scale credit rating has been assigned to the investment or entity, then the equivalent short-term or long-term global scale credit rating of such Rating Agency; or in respect of the Derivative Counterparty: (i) if a national scale, national currency credit rating has been assigned to the entity, then at least F1(zaf) by Fitch on a short-term scale and at least A(zaf) on a long-term scale or, in the case of any other Rating Agency (where applicable) the equivalent short-term or long-term national scale credit rating of such Rating Agency and (ii) in the absence of such a national scale, national currency credit rating, if a global scale credit rating has been assigned to the entity, then the equivalent short-term or long-term global scale credit rating of such Rating Agency; in respect of the Account Bank: (i) if a national scale, national currency credit rating has been assigned to the entity, then at least F1(zaf) by Fitch on a shortterm scale or, in the case of any other Rating Agency (where applicable) the equivalent national scale 38

40 credit rating of such Rating Agency and (ii) in the absence of such a national scale, national currency credit rating, if a global scale credit rating has been assigned to the entity, then the equivalent short-term or long-term global scale credit rating of such Rating Agency; in respect of the GIC Provider: (i) if a national scale, national currency credit rating has been assigned to the entity, then at least F1(zaf) by Fitch on a shortterm scale and (ii) in the absence of such a national scale, national currency credit rating, if a global scale credit rating has been assigned to the entity, then the equivalent short-term or long-term global scale credit rating of such Rating Agency; in the case of a Notification Trigger Event in respect of the Servicer and/or for the purposes of clause 18.5 of the Master Servicing Agreement (i.e. termination of appointment and replacement of, the Servicer): if a national scale, national currency credit rating has been assigned to the entity, then at least BBB(zaf) on a long term scale or, in the case of any other Rating Agency (where applicable), the equivalent long term national scale rating of such Rating Agency and (ii) in the absence of such a national scale, national currency credit rating, if a global scale credit rating has been assigned to the entity, then the equivalent long-term global scale credit rating of such Rating Agency; in the case of a Cash Management Trigger in respect of the Servicer (as contemplated in Appendix 5 of the Servicing Agreement): (i) if a national scale, national currency credit rating has been assigned to the entity, then at least F1(zaf) by Fitch on a shortterm scale or, in the case of any other Rating Agency (where applicable) the equivalent national scale credit rating of such Rating Agency and (ii) in the absence of such a national scale, national currency credit rating, if a global scale credit rating has been assigned to the entity, then the equivalent short-term or long-term global scale credit rating of such Rating Agency; 1.68 SBG the group consisting of all the subsidiary and associated companies of SBSA s holding company as reflected in the most current audited financial statements of SBSA; 1.69 Security the security constituted by the Security Agreements and the Guarantee, or any one or more thereof, as the context dictates; 1.70 Servicer Advance the amount which the Servicer is entitled, but not obliged, to pay into the Transaction Account equal to any instalments owing under a Participating Asset but unpaid prior to such Determination Date, as more fully contemplated in the Servicing Agreement; 1.71 Servicer Indemnity Undertaking in relation to Guaranteed Home Loans, the undertaking by the Servicer in terms of the Servicer Undertaking Agreement to collect from the Borrower in terms of the Borrower Indemnity and/or Indemnity Bond, all amounts owed to SBSA under the Borrower Indemnity and to pay over such amounts to the Issuer in accordance with the corresponding claim received from the Issuer in terms of the Servicer Undertaking Agreement, or, alternatively, to transfer the relevant Indemnity Bond to the Issuer; 39

41 1.72 Servicer Undertaking Agreement the agreement entered into between the Servicer, the Seller, the Issuer and the Security SPV, as amended, novated or substituted from time to time in accordance with its terms, pursuant to which, inter alia, the Servicer gives Services Indemnity Undertaking in respect of Guaranteed Home Loans; 1.73 Security SPV Blue Granite No. 2 Security SPV (Proprietary) Limited registered and incorporated in accordance with the laws of South Africa under registration number 2006/007773/07 and its successors-intitle and assigns; 1.74 Seller SBSA; 1.75 Servicing Fee Cap 0.1% per annum of the aggregate Principal Balances of the Participating Assets of the Issuer at the beginning of each Collection Period; 1.76 Stop Purchase Event the occurrence of any of the following events: enforcement of the Security in accordance with the provisions of the Security Agreements; the removal of SBSA as Servicer; the date on which the Notes are redeemed in full; any Determination Date on which there is a lack of available funds, in terms of the Pre-Enforcement Priority of Payments, to credit the Cash Reserve up to the Cash Reserve Required Amount; the Arrears Reserves are not funded at the Arrears Reserve Required Amount on 2 consecutive Payment Dates; the Class A Notes no longer being outstanding; an Arrears Reserve Trigger Event has occurred and is continuing; the Issuer amending the Eligibility Criteria, unless the Rating Agency notifies the Issuer in writing that such amendments may not cause it to downgrade or withdraw its respective current Ratings of the Notes in issue; the end of the Revolving Period; and/or the Principal Deficiency calculated on the Determination Date immediately preceding the date on which Additional Assets are purchased does exceed zero; 1.77 Subordinated Lender(s) Subordinated Lender No 1 and/or Subordinated Lender No 2, as the context may indicate; 1.78 Subordinated Lender No 1 a member of SBG, as specified in the Subordinated Loan Agreement (First Loss) and its successors-in-title and/or assignees; 1.79 Subordinated Lender No 2 SBSA and its successors-in-title and/or assignees; 1.80 Subordinated Loan Agreement the Subordinated Loan Agreement between the Issuer, (First Loss) Subordinated Lender No 1, the Administrator and the Security SPV, as amended, novated, and/or substituted from time to time in accordance with its terms, in terms of which Subordinated Lender No 1 will bear a first-loss interest in the Issuer and which ranks subsequent to the Subordinated Loan Agreement (Second Loss) in the Priority of Payments; 1.81 Subordinated Loan Agreement the Subordinated Loan Agreement between the Issuer, (Second Loss) Subordinated Lender No 2, the Administrator and the Security SPV, as amended, novated and/or substituted from time to time in accordance with its terms, in terms of which Subordinated Lender No 2 will bear a second-loss interest in the Issuer; 40

42 1.82 Subordinated Loan No 1 the subordinated loan contemplated in the Subordinated Loan Agreement (First Loss); 1.83 Subordinated Loan No 2 the subordinated loan contemplated in the Subordinated Loan Agreement (Second Loss); 1.84 Substitution Date any Business Day of a month; 1.85 Top-Up Date any Business Day during the Revolving Period; and 1.86 Transaction Documents the Common Terms Agreement, the Sale Agreement, the Servicing Agreement, the Servicer Undertaking Agreement, the Administration Agreement, the trust deed of the Owner Trust, the trust deed of the Security SPV Owner Trust, the memorandum and articles of association of the Issuer and the memorandum and articles of association of the Security SPV, the Bank Agreement, the Owner Trust Suretyship, the Pledge, the Security Cession, the Guarantee, the Indemnity, the Preference Share Subscription Agreement, the Subordinated Loan Agreement (First Loss), the Subordinated Loan Agreement (Second Loss), the Guaranteed Investment Contract, the agreements entered into from time to time with Derivative Counterparties, the letter of appointment of the Security SPV, the Notes, the Note Subscription Agreements, the Programme Agreement, the Transfer Agent Agreement, the Safe Custody Agreement, the Programme Memorandum, the Applicable Transaction Supplement and the Applicable Pricing Supplements. 41

43 ADDITIONAL/AMENDED TERMS AND CONDITIONS The Terms and Conditions set out in the Programme Memorandum are applicable. 42

44 GENERAL INFORMATION Authorisation All consents, approvals, authorisations or other orders of all regulatory authorities required by the Issuer under the laws of South Africa have been given for the establishment of the Issuer Programme and the issue of Notes under the Issuer Programme and for the Issuer to undertake and perform its obligations under the Transaction Documents. SBSA has approved the accession of the Issuer to the Master Programme. Banks Act The Registrar of Banks has confirmed in writing that the Issuer is authorised to issue commercial paper in terms of the Issuer Programme, pursuant to a securitisation scheme in terms of paragraph 13(1)(b)(ii) of the Securitisation Regulations, subject, inter alia, to the Registrar of Banks: (i) being provided with a copy of the Transaction Supplement upon its publication; and (ii) being provided with written confirmation by auditors, duly appointed by the Issuer in terms of paragraph 14 of the Securitisation Regulations, that there will be compliance with the relevant provisions thereof with regard to the conduct of the Securitisation Scheme. Compliance with the scheme remains the responsibility of the Issuer. Listing The Programme Memorandum has been registered by BESA. Each Tranche of Notes will be listed on BESA or any successor exchange or such other or further exchanges as may be agreed between the Issuer and the Dealer(s) and subject to any Applicable Laws. Clearing systems The Notes have been accepted for clearance through the Central Securities Depository which, as the operator of an electronic clearing system, has been appointed by BESA to match, clear and facilitate the settlement of transactions concluded on BESA. The Notes may be accepted for clearance through any additional clearing system as may be agreed between BESA and the Issuer. Settlement agents As at the date of this Transaction Supplement, the participants which are approved by BESA as Settlement Agents, are the South African Reserve Bank, SBSA, FirstRand Bank Limited, Nedbank Limited and Absa Bank Limited. Euroclear Bank S.A./N.V. as operator of the Euroclear System and Clearstream Banking Societe Anonyme will settle transactions through South African Settlement Agents. Material Change Save as disclosed in this Transaction Supplement and save as required pursuant to the Transaction Documents, the Issuer has not traded from the date of its incorporation on 15 March 2006 to the Initial Issue Date and no transactions have occurred during such period. Litigation The Issuer is not engaged (whether as defendant or otherwise) in any legal, arbitration, administration or other proceedings other than those disclosed in this Transaction Supplement, if any, the results of which might have or have had a significant effect on the financial position or the operations of the Issuer, nor is it aware of any such proceedings being threatened or pending. Auditors The current auditors of the Issuer are KPMG and PricewaterhouseCoopers. 43

45 Documents For so long as any note remains outstanding, one copy of the Programme Memorandum and each of the documents referred to in the section of the Programme Memorandum headed Documents incorporated by Reference and the section of this Transaction Supplement headed Transaction Documents will be available for inspection by the Noteholders at the Specified Office of the Issuer. By our signature of this Transaction Supplement, we confirm that the Issuer accedes to the Master Programme. Notwithstanding the date of signature of this Transaction Supplement, this Transaction Supplement shall take effect on 19 June BLUE GRANITE INVESTMENTS NO. 2 (PROPRIETARY) LIMITED By: By: Date: Date: 44

46 CORPORATE INFORMATION ISSUER SECURITY SPV Blue Granite Investments No. 2 (Proprietary) Limited Blue Granite No. 2 Security SPV (Proprietary) Limited (Registration number 2006/007779/07) (Registration number 2006/007773/07) Standard Bank Centre Maitland Trust Limited 9th Floor, Reception 3 1st Floor, 32 Fricker Road 5 Simmonds Street Illovo Boulevard Johannesburg, Contact: The Securitisation Manager Contact: Mr Werner Behrens ARRANGER, DEALER AND SPONSORING SERVICER MEMBER The Standard Bank of South Africa Limited The Standard Bank of South Africa Limited (Registration number 1962/000738/06) (Registration number 1962/000738/06) 3 Simmonds Street Standard Bank Centre Johannesburg, rd Floor, 6 Simmonds Street Contact: The Director: Securitisation Johannesburg, 2001 Contact: Financial Director: Home Loans SELLER ORIGINATOR The Standard Bank of South Africa Limited The Standard Bank of South Africa Limited (Registration number 1962/000738/06) (Registration number 1962/000738/06) Standard Bank Centre Standard Bank Centre 3rd Floor 3rd Floor 6 Simmonds Street 6 Simmonds Street Johannesburg, 2001 Johannesburg, 2001 Contact: The Financial Director: Home Loans Contact: The Financial Director: Home Loans ATTORNEYS TO THE ARRANGER TRANSFER AGENT Sonnenberg Hoffmann Galombik Computershare Investor Services 2004 ABN Amro House (Proprietary) Limited Ground Floor, 2 Exchange Square (Registration number 2004/003647/07) 85 Maude Street Ground Floor Sandown, Marshall Street Contact: Mr Stephen von Schirnding Johannesburg, 2001 Contact: The Company Secretary Fax (011) SETTLEMENT AGENT ADMINISTRATOR AND CALCULATION AGENT The Standard Bank of South Africa Limited The Standard Bank of South Africa Limited (Registration number 1962/000738/06) (Registration number 1962/000738/06) 25 Sauer Street Standard Bank Centre Johannesburg, th Floor, Reception 3 Contact: Ms Prabashni Howard 5 Simmonds Street Johannesburg, 2001 Contact: The Securitisation Manager AUDITORS TO THE ISSUER AUDITORS TO THE SECURITY SPV PricewaterhouseCoopers Inc. PricewaterhouseCoopers Inc. 2 Eglin Road 2 Eglin Road Sunninghill, 2157 Sunninghill, 2157 KPMG KPMG 85 Empire Road 85 Empire Road Parktown, 2193 Parktown,

47 Appendix 1 ASSET POOL STRATIFICATION Loan Size (Rands) Count % Value % 0 100, % R4,261, % 100, ,000 1, % R163,445, % 200, , % R247,272, % 300, , % R332,750, % 400, , % R347,674, % 500, ,000 1, % R664,008, % 750,000 1,000, % R438,432, % 1,000,000 1,250, % R209,373, % 1,250,000 1,500, % R170,226, % 1,500,000 2,000, % R133,757, % 2,000,000 2,500, % R71,522, % 2,500,000 3,000, % R49,071, % > 3,000, % R9,287, % Total 5, % R2,841,083, % Loan to Value (LTV) Count % Value % 0% 50% 1, % R355,555, % 50% 60% % R219,425, % 60% 70% % R309,043, % 70% 75% % R205,154, % 75% 80% % R229,338, % 80% 85% % R212,603, % 85% 90% % R388,289, % 90% 95% % R251,966, % 95% 100% 1, % R669,706, % > 100% % R % Total 5, % R2,841,083, % Installment to Income (ITI) Count % Value % 0% 5% % R81,693, % 5% 10% % R295,310, % 10% 15% 1, % R479,231, % 15% 20% 1, % R663,079, % 20% 25% 1, % R652,659, % 25% 30% 1, % R669,107, % > 30% % R % Total 5, % R2,841,083, % 46

48 Interest Rate Distribution (%) Count % Value % 0% 8.0% % R8,501, % 8.0% 8.5% % R180,058, % 8.5% 9.0% 1, % R1,236,238, % 9.0% 9.5% 1, % R765,039, % 9.5% 10.0% 1, % R407,691, % 10.0% 10.5% % R214,676, % 10.5% 11.0% % R23,108, % 11.0% 11.5% % R2,642, % 11.5% 12.0% % R590, % > 12.0% % R2,535, % Total 5, % R2,841,083, % Borrower Income (Rands) Count % Value % 0 10, % R133,280, % 10,000 20,000 1, % R544,359, % 20,000 30,000 1, % R577,612, % 30,000 40, % R449,184, % 40,000 50, % R325,086, % 50,000 60, % R225,514, % 60,000 70, % R122,480, % 70,000 80, % R123,770, % 80,000 90, % R69,262, % > 90, % R270,532, % Total 5, % R2,841,083, % Borrower Age Count % Value % > % R56,551, % % R228,502, % % R361,564, % % R453,759, % , % R572,192, % , % R655,994, % % R407,819, % < % R104,697, % Total 5, % R2,841,083, % 47

49 Geographic Distribution Count % Value % Gauteng 3, % R1,657,225, % Eastern Cape % R131,906, % Free State % R79,277, % KwaZulu-Natal % R318,987, % Mpumalanga % R102,382, % North West Province % R58,825, % Northern Cape % R35,350, % Northern Province % R47,196, % Western Cape % R409,930, % Total 5, % R2,841,083, % Property use Count % Value % Primary/Main Residence 5, % R2,612,852, % Secondary Residence % R43,463, % Holiday Home % R3,742, % Residential and Business % R1,975, % Business Purposes % R8,850, % Vacant Land % R830, % Vacant Land (building plans) % R % Buliding Loan % R2,482, % Smallholding (> 8.56 ha) % R2,417, % Renting/Investment % R71,739, % Unspecified % R92,728, % Total 5, % R2,841,083, % Payment Method Count % Value % Debit Orders % R264,832, % Other 5, % R2,576,251, % Total 5, % R2,841,083, % Access Bond Count % Value % Redraws available 2, % R1,480,341, % No Redraws 2, % R1,360,742, % Total 5, % R2,841,083, % 48

50 Loan Portfolio Summary Pool cut date 12-Jun-06 Number of Loans 5,834 Aggregate Balance Outstanding R2,841,083, Average Loan Size R486, Minimum Loan Balance R75, Maximum Loan Balance R3,261, Average Monthly Borrower Income R32, Minimum Monthly Borrower Income R3, Average Interest Yield (weighted by value) 9.17% Minimum Interest Yield 7.35% Maximum Interest Yield 12.50% Average Loan to Value Ratio (weighted by value) 77.03% Minimum Loan to Value Ratio 2.25% Maximum Loan to Value Ratio 99.97% Average Installment to Income Ratio (weighted by value) 18.71% Minimum Installment to Income Ratio 0.52% Maximum Installment to Income Ratio 29.99% Self-employed Borrowers (Percentage of pool) 22.95% Borrowers with Redraw Facility (Percentage of pool) 52.10% 49

51 Appendix 2 AUDITORS REPORT The following is the text of the letter to the Issuer, by the auditors appointed for this purpose by the Issuer, confirming that each issue of Notes by the Issuer under the Issuer Programme as detailed in the Programme Memorandum and the Transaction Supplement complies in all respects with the provisions of the Securitisation Regulations promulgated in Government Notice 681 (Government Gazette No. 2645, 4 June 2004) pursuant to the provisions of the Banks Act, REPORT OF THE INDEPENDENT AUDITORS OF BLUE GRANITE INVESTMENTS NO. 2 (PROPRIETARY) LIMITED ON COMPLIANCE OF THE ISSUE BY BLUE GRANITE INVESTMENTS NO. 2 (PROPRIETARY) LIMITED OF SECURED NOTES PURSUANT TO THE ASSET BACKED NOTE PROGRAMME AS DESCRIBED IN THE PROGRAMME MEMORANDUM DATED 28 OCTOBER 2005 AND THE TRANSACTION SUPPLEMENT DATED 2006 WITH THE RELEVANT PROVISIONS OF THE SECURITISATION REGULATIONS (GOVERNMENT NOTICE 681, GOVERNMENT GAZETTE OF 4 JUNE 2004) ISSUED BY THE REGISTRAR OF BANKS, AS REQUIRED BY PARAGRAPHS 14(1)(a)(ii) AND 15(2)(a)(vii) OF THE SAID NOTICE. 1. INTRODUCTION As required by Paragraph 14(1)(a)(ii) and 15(2)(a)(vii) of the Securitisation Regulations (Government Notice 681, Government Gazette of 4 June 2004) issued by the Registrar of Banks (the Securitisation Regulations ), we have reviewed whether or not the issue of limited recourse secured registered Notes by Blue Granite Investments No. 2 (Proprietary) Limited (the Issuer ) with an aggregate Principal Amount of up to R (the Notes ) pursuant to the Asset Backed Note Programme (the Issuer Programme ), as documented in the Programme Memorandum dated 28 October 2005 (the Programme Memorandum ) and the Transaction Supplement dated 2006 (the Transaction Supplement ), will be compliant with the relevant provisions of the Securitisation Regulations. We conducted our review in accordance with the statement of South African Auditing Standards applicable to review engagements. Compliance with the relevant provisions of the Securitisation Regulations is the responsibility of the Issuer. We report on such compliance. 2. SCOPE Our review was generally limited to an examination of the Programme Memorandum and the Transaction Supplement, with regard to compliance with the relevant provisions of the Securitisation Regulations. It should be recognised that our review did not constitute an audit and may not necessarily have revealed all material facts. 3. FINDINGS Our review revealed nothing which caused us to believe that the Issuer will not be in compliance with the relevant provisions of the Securitisation Regulations with regard to the issue of the Notes, pursuant to the Issuer Programme and with regard to the conduct of the scheme, as described in the Programme Memorandum and the Transaction Supplement. Yours faithfully KPMG Registered Accountants and Auditors Chartered Accountants (SA) Johannesburg

52 Appendix 3 ESTIMATED AVERAGE LIVES OF THE NOTES This section should be read in conjunction with, and is qualified in its entirety by, the detailed information contained elsewhere in this Transaction Supplement and the Programme Memorandum. The average lives of the Notes cannot be predicted, as the actual rate of Repayments, Prepayments, Redraws and Further Advances under the Participating Assets, and a number of other relevant factors, are unknown. Calculations of the estimated average lives of the Notes can be made based on certain assumptions. For example, based on the assumptions that: (i) Call Options (a) the option to redeem the Notes in accordance with Condition is exercised on the Interest Payment Date falling on 21 June 2010 and 21 June 2011, respectively, and that the Revolving Period endures for 3 years from the Initial Effective Date; (b) the Early Redemption Option is not exercised; (ii) the Participating Assets are subject to total repayments (net of Redraws and Further Advances) at annualised rates expressed as a percentage of the Principal Balances of the Participating Assets assumed to fall into the range indicated below; (iii) total repayments on the Participating Assets are expected to partially represent Repayments and partially Prepayments. The resulting annualised rate is assumed to fall into the range indicated below; (iv) during the Revolving Period, the Issuer may acquire Additional Assets to the extent of Repayments and Prepayments in each Collection Period. The resulting rate of repayment on the Notes during the Revolving Period is assumed to be zero. Thereafter, the rate of repayment on the Notes is assumed to equal the total repayment on the Participating Assets (net of Redraws and Further Advances); (v) there are no enforcements after the Initial Effective Date; (vi) no Participating Assets are sold by the Issuer; (vii) no Notes are purchased by the Issuer, other than as contemplated under (i)(a); (viii) the Participating Assets continue to be Fully Performing; and (ix) no Principal Deficiency arises. Assumed Rate of total Prepayments on the Home Loans 0% 12,5% 25,0% Estimated Average Life of Class A1 Notes (years) Estimated Average Life of Class A2 Notes (years) 5, Estimated Average Life of Class A3 Notes (years) 5,00 5,00 5,00 Estimated Average Life of Class B Notes (years) 5,00 5,00 5,00 Estimated Average Life of Class C Notes (years) 5,00 5,00 5,00 Estimated Average Life of Class D Notes (years) 5,00 5,00 5,00 Estimated Average Life of Class E Notes (years) 5,00 5,00 5,00 Estimated Average Life of Class F Notes (years) 5,00 5,00 5,00 Assumptions (i)(a) and (i)(b): no assurance can be given that redemption of the Notes will occur as described. Assumptions (ii) and (iii) state the annualised Repayment and Prepayment rates on the Participating Assets. Each of these rates may substantially vary from one Interest Period to another. The annualised Repayment and Prepayment rates shown above are purely illustrative and do not represent the full range of possibilities for such Participating Assets. Assumption (iv) states annualised repayment rates on the Notes during and after the Revolving Period. Each of these rates may substantially vary from one Interest Period to another. The annualised repayment rates on the Notes shown are purely illustrative and don not reflect the full range of possibilities for such rates. Assumptions (v), (iv), (vii), (viii) and (ix) relate to circumstances which are not predictable. The average lives of the Notes are subject to factors largely outside the control of the Issuer and consequently no assurance can be given that the above assumptions and estimates will prove in any way to be realistic and the above estimated average lives must therefore be viewed with caution. 51

53